The Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman, underscores a sustained commitment to infrastructure-led growth. Public capital expenditure, set at Rs. 12.2 lakh crore, marks a critical step in advancing India’s urban development, improving connectivity, and boosting private investment in real estate-linked assets. Experts say these measures are poised to accelerate regional growth, reduce logistics costs, and unlock opportunities for both developers and investors.
Dikshu C. Kukreja, Infrastructure Expert and Urban Town Planner, highlights the significance of this long-term push. “The jump in public capital expenditure from Rs. 2 lakh crore in 2014-15 to Rs. 11.2 lakh crore in Budget 2025-26, with a proposed increase to Rs. 12.2 lakh crore in FY2026-27, reflects the government’s long-term commitment to infrastructure-led growth. This scale of investment will significantly reduce logistics costs, bring in private capital, and accelerate the economic development of urban precincts across India.”
Kukreja further noted that the establishment of the Infrastructure Risk Guarantee Fund, coupled with asset monetization instruments like REITs and InvITs, will directly address construction-phase risks, unlocking private investments in roads, urban infrastructure, and real estate-linked projects.
Public Capital Expenditure: A Catalyst for Urban Growth
Nitesh Kumar, MD & CEO, Emami Realty Ltd, says the budget signals a transformative phase for India’s real estate sector. “The increase in public capital expenditure to Rs. 12.2 trillion for FY2026-27 will accelerate urban infrastructure projects, creating new opportunities in Tier 1 and Tier 2 cities where demand for quality housing and commercial spaces is surging. The proposal to establish dedicated Real Estate Investment Trusts (REITs) for recycling real estate assets held by Central Public Sector Enterprises is a game-changer, unlocking underutilized land and fostering greater investment in the sector.”
Kumar added that the Infrastructure Risk Guarantee Fund will provide much-needed credit support, reducing risks for lenders and enabling smoother financing for large-scale developments. He concluded that these measures will enhance affordability, boost rental housing initiatives, and drive sectoral momentum, aligning with the vision of future-ready communities.
Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings at ICRA, emphasized that the 9% increase in public capital expenditure will benefit capital goods and engineering procurement companies. “Increased allocation towards capex-focused schemes in power and renewables will strengthen the order books of capital goods players. Tax holidays for foreign companies availing cloud services from data centres, and exemptions on import duties for nuclear and lithium-iron cell manufacturing, are positive steps for capital-intensive sectors,” he said.
Railways: Driving National Connectivity
The railways continue to receive focused attention, with gross budgetary support rising 10% to Rs. 2.78 trillion in FY2027, nearly 23% of total capital expenditure. Suprio Banerjee, Vice President & Co-Group Head, ICRA Ltd., explains, “Track infrastructure, rolling stock, signalling, electrification, and customer amenities dominate allocations with a 64% share, in line with FY2026. The development of seven high-speed corridors and a new dedicated freight corridor line is expected to enhance the sector’s effectiveness and attractiveness.”
Railway investments not only improve connectivity between cities but also catalyze real estate development along transit corridors, spurring residential and commercial demand in urban and peri-urban zones.
Roads and Highways: Accelerating Mobility
Road transport is a key enabler of logistics efficiency and regional growth. Banerjee highlighted that the gross budgetary allocation for the Ministry of Road Transport & Highways rose 8% to Rs. 2.94 trillion in FY2027. “These allocations support the National Infrastructure Pipeline works. NHAI’s monetization target of Rs. 30,000 crore remains, with significant progress already achieved through Toll-Operate-Transfer bundles and InvITs,” he said.
Infrastructure experts note that the expansion of highways and expressways reduces transit times, lowers logistics costs, and encourages private investments in warehousing, industrial parks, and residential developments along these corridors.
Urban Infrastructure, Water, and Municipal Services
The Budget also focuses on strengthening city infrastructure and municipal services, with renewed emphasis on tier-2 and tier-3 towns. Ramveer Singh, Chairman, EMS Limited, said, “Expanding market-based funding options for urban local bodies strengthens fiscal independence and project investment capabilities. Sustained focus on schemes like AMRUT, along with city economic region development, will boost demand for water management and urban infrastructure services across the country.”
Urban infrastructure improvements, including water supply, sewage management, and municipal services, directly enhance liveability and attract private real estate investment. These initiatives ensure that urban expansion is balanced with sustainability and quality-of-life considerations.
Global Mobility and Investment Sentiment
Rohit Santosh, CEO, Bombay Realty (Wadia Group), highlighted the broader investment ecosystem. “The budget reflects a globally attuned economic outlook. Measures easing overseas travel and international spending enhance financial flexibility for HNIs and NRIs, facilitating long-term investments in India. Sustained investment in urban infrastructure, connectivity, and city liveability reinforces confidence among globally mobile investors, signaling robust growth in the real estate sector.”
Santosh added that ancillary industries supporting real estate—construction materials, cement, steel, machinery, and building services—are scaling up, enabling faster project execution with higher quality standards. High-speed rail projects such as Mumbai–Pune and Pune–Hyderabad corridors are expected to unlock new micro-markets, further enhancing investment prospects.
Infrastructure Risk Mitigation: Unlocking Private Capital
A recurring theme across expert analyses is the government’s proactive approach to mitigating risks for private investors. The proposed Infrastructure Risk Guarantee Fund, along with REITs and InvITs, provides credit support and monetization pathways for large-scale projects. This mechanism is expected to attract long-term institutional capital into urban infrastructure, highways, railways, and real estate projects, ensuring steady momentum and enhanced affordability.
Kukreja emphasized the need for patient capital and risk confidence. “Infrastructure development requires long-term planning. With these measures, India is creating an ecosystem where private capital can flow safely, supporting roads, urban precincts, and real estate-linked assets.”
Towards a Viksit Bharat: Long-Term Implications
The Budget 2026-27’s infrastructure allocations are not just about immediate fiscal stimulus—they signal a roadmap for India’s economic transformation. By investing in railways, roads, urban infrastructure, and municipal services, the government is facilitating private sector participation, improving liveability, and strengthening investment confidence across the real estate and capital goods sectors.
Analysts agree that the cumulative effect of these measures will be far-reaching. Increased public capital expenditure, risk mitigation tools, and asset monetization strategies will reduce logistics costs, accelerate urban development, and unlock investment opportunities in both residential and commercial real estate. As Singh notes, “This focus on infrastructure, inclusion, and industry has huge potential for regional growth and urban development, driving India closer to its 2047 vision of a Viksit Bharat.”
The convergence of public investment, private capital, and risk-sharing frameworks promises a robust foundation for sustainable infrastructure-led growth. With Tier 2 and Tier 3 towns gaining focus, and metropolitan areas benefiting from enhanced connectivity, the real estate sector is poised for structural momentum, bridging gaps in housing, commercial spaces, and urban amenities.
Union Budget 2026-27 marks a decisive step in India’s infrastructure journey. With ₹12.2 lakh crore earmarked for capital expenditure, the government has signaled both ambition and pragmatism, ensuring that projects are financially viable, risk-mitigated, and attractive for private investment. From railways and highways to urban water systems and municipal services, these allocations will shape India’s urban and regional landscapes for years to come.
As high-speed rail corridors, smart city initiatives, and sustainable urban precincts take shape, the interplay between public spending and private investment is set to redefine the real estate ecosystem. Developers, investors, and homebuyers stand to gain from a more predictable, structured, and opportunity-rich environment, laying the foundation for a truly Viksit Bharat.
