Home loan demand across urban and rural India is set to receive a renewed boost, with the Union Budget sharply increasing subsidy allocations for key housing schemes. The outlay for the urban housing programme has been more than doubled to Rs 18,625 crore for 2026–27 from Rs 7,500 crore, while the second phase of the scheme has been scaled up tenfold to Rs 3,000 crore from Rs 300 crore. The programme targets the construction of 2.24 crore urban homes, of which 1.22 crore had been sanctioned as of early January. Subsidies for rural housing have also been raised by over 50% to Rs 54,917 crore from Rs 32,500 crore. The rural scheme aims to build 4.95 crore homes, with 3.97 crore beneficiaries already registered as of late January. The higher budgetary allocations point to a renewed policy focus on boosting rural demand and farm-linked incomes through high-impact welfare programmes. Housing finance firms said the increased subsidies are expected to directly improve affordability and credit uptake, particularly in the affordable housing segment. The enhanced allocations significantly improve affordability for first-time homebuyers and lower-income households, expanding the potential borrower base and improving loan repayment capacity. This is expected to support asset quality and create a more sustainable demand environment, especially in Tier-II and Tier-III markets. The housing schemes are also expected to generate employment during the construction phase and account for nearly 10% of overall cement consumption in the country. Housing finance companies operating in the affordable housing segment across smaller cities are likely to continue seeing steady demand, with scheme implementation expected to gather momentum in FY27 following the resolution of earlier operational issues. Under the second phase of the urban housing scheme, the maximum eligible loan amount has been capped at Rs 25 lakh. Beneficiaries will receive the subsidy in five annual instalments totalling Rs 1.80 lakh, replacing the earlier one-time subsidy of Rs 2.67 lakh. The subsidy amount is uniform across economically weaker, lower-income and middle-income groups, with annual income caps of Rs 3 lakh, Rs 6 lakh and Rs 9 lakh respectively.
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