The dream of the Indian middle class has always been simple: “Apna Ghar” (Our own home). For decades, this dream was centered around metros like Delhi, Mumbai, or Bangalore. But in 2025, the script changed.
If you live in Jaipur, Indore, Coimbatore, or Bhubaneswar, you know exactly what I am talking about. Your city is no longer a “retirement paradise”; it is a booming economic hub. Glass facade offices are coming up, Global Capability Centers (GCCs) are hiring aggressively, and cafes are full on weekdays.
But when you went to book that 2BHK apartment in late 2025, you probably got a shock. The price tag wasn’t ₹35 Lakh anymore. It was ₹65 Lakh. And the broker told you, “Sorry Sir, no subsidy available.”
You are stuck in the “Middle Class Trap”. You earn enough to buy the house, but the government thinks the house is “too expensive” to be supported by tax breaks.
In this strategic guide, based on our “Budget 2025-26 Investment Insights“ report, we explain why the current housing policies are broken for Tier 2 India, and why waiting just a few weeks for Budget 2026 could save you a fortune.
Affordable housing limit 2026: The ₹45 Lakh Anomaly
Answer: The current definition of “Affordable Housing” is capped at a property value of ₹45 Lakh. This limit is obsolete because rising input costs have pushed standard inventory prices in Tier 2 cities to ₹60-70 Lakh.
Let’s look at the math that is hurting homebuyers today. The government’s “Affordable Housing” scheme was designed to help the common man. If you buy a house classified as “Affordable,” you get significant benefits, primarily extra tax deductions on home loan interest.
The Mismatch: The definition caps the property value at ₹45 Lakh for subsidies. This number might have made sense five years ago. But in 2025? It ignores reality.
- Input Costs: Cement, steel, and labor costs have surged since the cap was set.
- The New “Entry Level”: In growing cities like Coimbatore or Mohali, the price of a standard 2BHK has risen to ₹60-70 Lakh.
The Result: A huge segment of Tier 2 homebuyers are denied tax benefits because their homes cost ₹55 Lakh or ₹60 Lakh. You are effectively priced out of the subsidy but priced in to the market. You are buying homes without the government support you deserve.
Will affordable housing cap increase in Budget 2026?
Answer: There is a “High Probability” that Budget 2026 will redefine Affordable Housing limits to ₹75 Lakh for metros and ₹60 Lakh for Tier 2 cities to align with market realities.
Our research report identifies “Scenario C” for Budget 2026 as The Real Estate Push. Why is this likely?
- Fiscal Headroom: The government has the budget. Robust GDP growth (7.3-7.4%) and high tax collections mean the Finance Minister has the “fiscal headroom” to offer relief.
- The Demand: Industry bodies and homebuyers are vocal about this gap. The ₹45 Lakh cap is widely seen as an “anachronism” (something belonging to the past).
The Expectation: We expect the definition to be split:
- Metros/Tier 1: Limit raised to ₹75 Lakh.
- Tier 2: Limit raised to ₹60 Lakh.
If this happens, a ₹60 Lakh apartment in Indore suddenly becomes eligible for “Affordable Housing” benefits.
Why should I wait to buy a house until Budget 2026?
Answer: Buying now means locking in a loan under the old rules. Waiting until February 2026 could allow you to claim additional tax deductions on interest if the “Affordable Housing” limit is raised, potentially saving lakhs over the loan tenure.
The Strategy: “Wait and Watch” Our advice to the Paisaseekho audience is simple: If you are planning to buy a home, wait until February 2026.
Here is the financial logic:
- Tax Savings: If the limit is raised, you could claim extra deductions on your home loan interest under relevant sections (like the old 80EEA style benefits if revived or integrated into the new Act).
- Subsidies: Eligibility for credit-linked subsidy schemes often hinges on this definition.
- Market Correction: If the budget disappoints (Scenario B), you might see a slight cooling in sentiment, allowing you to negotiate better. But if it delivers (Scenario C), you want to be ready to buy with the benefits.
Tier 2 city property prices: Bubble or Real Growth?
Answer: The price rise in Tier 2 cities is driven by fundamental demand—specifically job growth from GCCs and manufacturing—not just speculation. This suggests sustained long-term appreciation.
Many potential buyers worry: “Is this a bubble? Will prices crash?” The data from 2025 suggests this is a structural shift, not a bubble.
1. The Employment Shift The narrative that “jobs are only in Bangalore and Gurgaon” was challenged in 2025.
- GCCs (Global Capability Centers): Tier 2 cities witnessed a 21% Year-on-Year growth in hiring by these MNC hubs, outpacing the 11% growth in metros.
- Manufacturing: The decentralization of manufacturing due to PLI schemes has led to a hiring surge in industrial belts around Tier 2 cities.
2. Lifestyle Housing Real estate in non-metros is no longer just about buying “plots” of land. It is about vertical growth (apartments) and lifestyle housing. People are upgrading their lifestyle because they are optimistic about their future income.
This “White-Collar Disposable Income” in cities like Lucknow and Vizag is fueling genuine demand for housing, retail, and entertainment.
Budget 2026 impact on homebuyers and Investment Tips
Answer: Beyond the price cap, Budget 2026 is expected to push infrastructure-led urbanization. Investors should focus on suburbs of Tier 2 cities where metros and ring roads are being built.
Where to Invest in 2026: If the “Real Estate Push” (Scenario C) happens, we will see a surge in sales for mid-segment developers.
The “Paisaseekho” Tip: Focus on Emerging Suburbs. Don’t buy in the congested city center. Buy where the new infrastructure is going.
- Look for: Metro lines, Ring Roads, and Industrial Corridors.
- Why: The government’s promise of “infrastructure-led urbanization” in Budget 2025 is translating into tangible property appreciation in these non-metro hubs.
Also, keep an eye on Cement and Piping stocks. If housing booms, these companies (many of which are mid-caps) will benefit directly.
Conclusion
The Indian real estate market is in a unique transition. The “Tier 2” story is the most exciting investment theme of the decade, but government policy is currently lagging behind market reality.
The ₹45 Lakh cap is a relic of the past. As a smart investor, you must anticipate the correction of this anomaly.
Do not rush. The weeks leading up to February 1, 2026, are for research, not for signing deeds. Identify the property, negotiate the price, but hold the registration until you hear what the Finance Minister has to say.
Your dream home will still be there in February—but the tax benefits you might miss by buying today won’t be coming back.
Want the full analysis of Scenario A, B, and C for Budget 2026? Read our comprehensive report “India’s Economic Transition: A Definitive Report on the Fiscal Impact of Budget 2025″.
FAQs: Home Buying & Budget 2026
Q1: What is the current limit for “Affordable Housing”?
A: Currently, a residential unit is considered “affordable” if its value is up to ₹45 Lakh. This limit determines eligibility for various tax benefits and subsidies.
Q2: Which cities are seeing the highest growth in jobs and housing?
A: Cities like Jaipur, Coimbatore, Indore, Lucknow, and Bhubaneswar are emerging as mini-tech hubs and industrial centers. They are witnessing high hiring growth and real estate demand.
Q3: Will home loan interest rates come down in 2026?
A: With inflation cooling to 1.33% in late 2025, a low-inflation environment typically precedes an interest rate cut cycle. While not guaranteed, the macroeconomic conditions are favorable for lower rates.
Q4: Should I buy a Plot or a Flat in a Tier 2 city?
A: The trend is shifting toward “vertical growth” (Flats) because of the demand for lifestyle amenities (security, gyms, etc.) driven by young professionals. However, plots in developing suburbs remain a strong long-term asset.
Q5: Can I claim tax benefits on a home loan under the New Tax Regime?
A: Under the New Tax Regime (Budget 2025), you can claim a deduction on interest specifically for a let-out property (rented out). However, for a self-occupied property, the interest deduction (Section 24b) is generally not available, which is why the “Affordable Housing” definition change is so critical—it often opens doors to specific exemptions or subsidy schemes.
