New Delhi, Feb. 1 -- The Union Budget 2026-27 stopped short of a broad-based push for real estate but introduced targeted measures that could have a lasting impact. Chief among these was a strong policy push for data centres, as well as steps to deepen the real estate investment trust (REIT) market.
However, the absence of meaningful measures for affordable housing remained a key disappointment.
Data centres
Finance minister Nirmala Sitharaman proposed a tax holiday until 2047 for foreign companies providing cloud services globally using data centre infrastructure located in India, a move aimed at boosting investment in the segment.
However, such companies will need to provide services to Indian customers through an Indian reseller entity.
The budget also proposed a safe harbour margin of 15% on costs where the data centre service provider in India is a related entity.
These steps are likely to improve the viability of large-scale data centre investments, enable faster capacity addition, and strengthen India's broader technology ecosystem.
"It is a strong commitment to attracting long-term capital and enhancing India's competitiveness in the digital economy," said Amit Sarin, managing director of real estate developer Anant Raj Ltd. "Beyond infrastructure, this push is expected to create high-quality employment, encourage innovation, and position India as a preferred destination for data-driven businesses and next-generation technology deployments."
The tax holiday will also have meaningful implications for commercial real estate, as data centres evolve from niche infrastructure into institutional-grade assets combining the stability of core infrastructure with the structural growth of the digital economy.
"Extending the tax holiday to 2047 is a significant strategic signal in the infrastructure location push," said Sunil Pareek, executive director at Assetz Property. "By decoupling the taxation of cloud services from the user's location and anchoring it to the physical location of servers, the government has created a long-term incentive for global technology players to build capacity in India for the next 20 years."
As a result, data centres as a segment will see many more players setting up facilities and investors backing such developments. A strong momentum in the segment is already underway with private equity majors such as Blackstone, among others, setting up dedicated verticals.
REITs
The budget also proposed the recycling of significant real estate assets of central public sector enterprises (CPSEs) through the creation of dedicated REITs. This move is expected to unlock new fundraising avenues for the government while deepening the REIT market.
To bolster public infrastructure projects, the government has continued to strengthen financing instruments such as infrastructure investment trusts (InVITs) and REITs, including through institutions like the National Investment and Infrastructure Fund (NIIF) and National Bank for Financing Infrastructure and Development (NaBFID).
In a statement, the Indian REITs Association said, "The creation of dedicated REITs for CPSEs reflects a clear move from passive ownership to efficient, market-linked asset management, while unlocking long-term value from mature public assets and recycling capital into fresh infrastructure development."
"By positioning REITs as a key mechanism for asset monetization, it reinforces their growing role in India's infrastructure financing ecosystem. Dedicated CPSE REITs can accelerate capital recycling, improve balance-sheet efficiency for public enterprises, and expand access to high-quality, income-generating assets for a wider investor base through transparent and regulated instruments," it added.
Capex and urban infrastructure
The government expanded public capital expenditure to Rs 12.2 lakh crore in 2026-27 from Rs 11.2 lakh crore in the previous fiscal year.
It will continue to focus on developing infrastructure in cities with populations of over five lakh (tier II and III), positioning smaller cities and towns as important growth centres. This is expected to attract large investments from infrastructure, logistics and real estate companies, creating opportunities across commercial, transport and public infrastructure assets.
Smaller cities have already seen strong momentum from logistics, real estate and retail players over the past five-seven years, driven by growing consumption and the growth of the aspirational middle class.
Affordable housing
On the downside, one of the biggest disappointments for the real estate sector was the absence of any major announcements for affordable housing.
According to real estate consultancy Anarock, the sales share of affordable housing has plummeted since the pandemic, from over 38% in 2019 to 26% in 2022 and around 18% in 2025.
"The affordable housing segment was in express need of direct intervention by way of interest stimulants for buyers and developers of affordable housing. The segment needed high-impact measures," said Anuj Puri, chairman and founder of Anarock.
Published by HT Digital Content Services with permission from VC Circle.