Market Radar India: Union Budget 2026 and its strategic impact on real estate

India’s Budget 2026 Blueprint

The Union Budget 2026-27 arrives as a cornerstone for India's long-term structural transformation, prioritising tech-led growth and massive infrastructure development amidst a period of significant global uncertainty.

Positioned on a path of resilience, the centrepiece of this fiscal roadmap is a record INR 12.2 lakh crore capital expenditure outlay, representing a 9% year-on-year increase specifically designed to crowd in private investment while simultaneously narrowing the fiscal deficit target to 4.3% of GDP.

A major strategic shift within this budget is the monetisation of Central Public Sector Enterprise (CPSE) land and buildings through dedicated REIT structures, a move intended to convert dormant public assets into high-value institutional-grade capital.

The rise of city economic regions and emerging hubs

The government is orchestrating a strategic pivot toward Tier 2 and Tier 3 cities to move beyond traditional megacities and foster more balanced regional growth across the subcontinent.

• City Economic Regions (CERs): Seven CERs, including hubs like Bangalore, Surat, and Varanasi, have been proposed with an allocation of INR 5,000 crore per region over five years to catalyse local housing, industrial, and office markets.
• High-Speed Connectivity: To reshape urbanisation patterns, seven new high-speed rail corridors - such as Mumbai-Pune and Delhi-Varanasi - have been announced as growth connectors that are expected to attract INR 16 lakh crore in total investment.
• Digital Infrastructure: Cementing India’s role as a global AI powerhouse, a 20-year tax holiday through 2047 was unveiled for foreign cloud providers using Indian data centres, supported by a 15% cost-based safe harbour margin for resident entities.
• Specialised Manufacturing: Initiatives such as the Biopharma SHAKTI scheme (INR 10,000 crore) and India Semiconductor Mission 2.0 (INR 40,000 crore) are set to drive substantial demand for specialised R&D spaces and Grade-A industrial warehousing.

While the budget offers indirect support for residential clusters through university townships and infrastructure, industry experts have noted a lack of direct sector-specific incentives for affordable housing, which continues to face significant cost pressures.

A landmark trade reset with Washington

In a move that has stunned global markets, India and the United States finalised a transformative trade agreement, which effectively resets a year of fractured ties and brings much-needed relief to the domestic economy.

Under this historic deal, the US has slashed its levy on Indian goods from 25% to 18%, a rate that makes Indian exports more competitive than those from regional peers like Vietnam and Thailand.

Central to this "first phase" is Prime Minister Modi’s agreement to halt crude oil purchases from Russia and instead source USD 500 billion in US goods, energy, and technology over the next five years.

The market reaction was immediate and overwhelmingly positive, as the Indian rupee posted its biggest gain in over three years and domestic stocks jumped the most since 2021.

Consequently, economists now suggest this deal could boost GDP by up to 0.3 percentage points, with growth projected to reach 7.4% for the upcoming fiscal year.

The digital export engine and GCC surge

While trade barriers fall, India is aggressively positioning itself as the "global backend" for the AI era through unprecedented fiscal incentives and infrastructure growth.

Finance Minister Nirmala Sitharaman’s announcement of a tax exemption until 2047 for hyperscalers like AWS, Google, and Microsoft provides a massive 20-year runway for foreign firms to deliver global cloud services from Indian soil.

This digital push is further validated by a new FICCI-Anarock report which predicts that the number of Global Capability Centres (GCCs) will rise to 2,400 by 2030, with a market size reaching USD 110 billion.

These centres, which already account for over 40% of total office leasing in top cities, are a primary driver for the Indian REIT market, which is expected to expand its penetration to 25-30% of institutional real estate by 2030.

Regional resilience

Amidst a broader slowdown in Asia Pacific growth, India remains the region’s primary growth engine due to robust domestic momentum and a healthy labour market.

Unlike many neighbours, the RBI has maintained a "higher-for-longer" interest rate stance, supported by soft inflation that continues to keep private consumption steady across the country.

This economic strength is reflected in the commercial real estate sector, where top cities now host approximately 800 million square feet of Grade-A office stock.

Furthermore, India has become a primary beneficiary of the "China+1" supply chain strategy, leading to a surge in demand for automation-ready logistics facilities and quick-commerce warehousing.

Even the hospitality sector is seeing a turnaround, with average daily rates growing by 10.7% in 2025 as travellers increasingly flock to cultural hubs like Jaipur, Kochi, and Lucknow.

Look out for a new edition of the GRI Institute's Market Radar India next week!