Union Budget 2026-27: Impact on India’s Construction Sector

Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman, presented the Union Budget 2026-27 on February 1, 2026. This marks the first Budget prepared at Kartavya Bhawan and sets a clear direction for India’s medium- to long-term growth strategy.

At its core, the Union Budget 2026–27 is anchored around three Kartavyas.

• Accelerating economic growth: Focus on improving productivity, enhancing competitiveness, and building resilience amid global economic uncertainty.
• Strengthening human capital: Emphasis on developing people’s capabilities and positioning citizens as active participants in India’s growth journey.
• Inclusive development: In line with Sabka Saath, Sabka Vikas, the Budget aims to ensure wider access to resources, infrastructure, and opportunities across regions and sectors.

Also Read: Economic Survey 2026: Infrastructure Sector Milestones & Future Outlook

Total Expenditure and Economic Highlights

The Union Budget 2026–27 estimates total expenditure at 53.47 Lakh INR-Crore, reflecting a 7.7% increase over the revised estimates of FY 2025–26. Capital expenditure stands at 12.21 Lakh INR-Crore, up 11.5% year-on-year (YoY), underlining the government’s continued focus on asset creation and long-term growth.

Expenditure on Major Items (INR-Crore)

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Industrial Sector: Key Announcements in Union Budget 2026-27

A defining feature of the Union Budget 2026–27 is its strategic push to scale manufacturing across seven priority and frontier sectors. Targeted schemes and large capital commitments will further support these.

Key industrial announcements include:

• Biopharma SHAKTI initiative:
  The Union Budget 2026–27 introduces Biopharma SHAKTI with an outlay of 10,000 INR-Crore over five years. The initiative aims to position India as a global biopharma manufacturing hub, driving demand for specialised manufacturing facilities, R&D centers, and compliance-driven industrial infrastructure.

• Electronics components manufacturing push:
  The outlay has been increased to 40,000 INR-Crore. This will accelerate the development of electronics manufacturing clusters and supporting industrial parks.

• Dedicated Rare Earth Corridors:
  The government will establish Rare Earth Corridors across mineral-rich states such as Odisha, Kerala, Andhra Pradesh, and Tamil Nadu. These corridors will support mining, processing, research, and downstream manufacturing.

• Chemical Parks through challenge-based model:
  A new scheme will support states in setting up three Chemical Parks through a challenge route.

• Scheme for Construction and Infrastructure Equipment (CIE):
  To strengthen domestic manufacturing capabilities, the Budget announces a Scheme for Enhancement of Construction and Infrastructure Equipment. This initiative will boost the production of high-value, technologically advanced equipment, supporting both manufacturing facilities and ancillary infrastructure.

• Container Manufacturing Scheme:
  A dedicated Container Manufacturing Scheme, with an allocation of over 10,000 INR-Crore over five years, has been announced. This will encourage the development of container manufacturing units, logistics parks, and port-linked industrial infrastructure.

• Mega Textile Parks focused on technical textiles:
  The government will set up Mega Textile Parks in challenge mode, with a strong emphasis on technical textiles. These parks will drive integrated textile manufacturing zones, including processing units, warehouses, and worker housing.

• Revival of legacy industrial clusters:
  A scheme to revive 200 legacy industrial clusters has been announced. The focus will be on improving cost competitiveness through targeted infrastructure upgrades and technology modernisation.

• New Dedicated Freight Corridors:
  New Dedicated Freight Corridors will be developed, connecting Dankuni in the East to Surat in the West. These corridors will further strengthen freight movement and trigger development of logistics hubs, warehousing zones, and industrial nodes along the route.

• Inland waterways ship repair ecosystem:
  A dedicated ship repair ecosystem for inland waterways will be developed at Varanasi and Patna. This will further support maritime infrastructure, dry docks, and allied industrial facilities.

• Seaplane manufacturing and connectivity incentives:
  The government will provide incentives to indigenise seaplane manufacturing, while also improving last-mile and remote connectivity. This move will support niche manufacturing facilities and small-scale aviation infrastructure development.

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Union Budget 2026–27: Allocation under Major PLI Schemes (INR Crore)

PLI Scheme	Actuals 2024-25	RE 2025-26	BE 2026-27
PLI for Large Scale Electronics & IT Hardware	5,756	7,000	1,527
PLI for Automobiles and Auto Components	325	2,091	5,940
PLI (Dept. of Pharmaceuticals)	2,433	2,493	2,500
PLI for Food Processing Industry	450	1,200	1,200
PLI for White Goods (ACs and LED Lights)	214	304	1,004
PLI for Specialty Steel	52	193	380
PLI for National Programme on Advanced Chemistry Cell (ACC) Battery Storage	12	13	86
PLI for Textiles	45	400	405

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Infrastructure Sector: Key Announcements in Union Budget 2026-27

Infrastructure remains the backbone of the government’s growth strategy. In the Union Budget 2026–27, railways and roads together account for nearly half of total capital expenditure.

Major infrastructure announcements include:

• Development of seven high-speed rail corridors as growth connectors. These corridors include –
  • Mumbai-Pune
  • Pune-Hyderabad
  • Hyderabad-Bengaluru
  • Hyderabad-Chennai
  • Chennai-Bengaluru
  • Delhi-Varanasi
  • Varanasi-Siliguri
• Integrated development of 500 reservoirs and Amrit Sarovars
• 67,300 INR-Crore allocation under the Jal Jeevan Mission
• AMRUT: received an allocation of 8,000 INR-Crore. The scheme is aimed at strengthening urban infrastructure such as water supply, sewerage networks, and drainage systems. 

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Buildings & Real Estate: Key Measures in Union Budget 2026-27

The Finance Minister described this Budget as a “Yuva Shakti-driven Budget,” reflected in several initiatives focused on digital infrastructure and skill development. The Union Budget 2026–27 places a strong emphasis on the education sector. Moreover, it highlights continued policy support for healthcare and a renewed push towards tourism development. 

Key announcements include:

• Higher urban and housing capex:
  The Union Budget 2026–27 allocates 34,808 INR-Crore in capital expenditure to the Ministry of Housing and Urban Affairs. Additionally, PMAY-U and PMAY-U 2.0 received 18,625 INR-Crore and 3,000 INR-Crore allocations, respectively. These will reinforce the government’s continued focus on urban housing supply, affordable housing projects, and city-level infrastructure development.

• Boost to data center infrastructure:
  To strengthen India’s position as a global digital infrastructure hub, the government has extended the tax holiday for foreign cloud service providers till 2047. Provided they operate through India-based data centers. This move will accelerate investments in hyperscale data centers, supporting construction activity in technology-driven real estate.

• Infrastructure Risk Guarantee Fund:
  The Budget proposes the creation of an Infrastructure Risk Guarantee Fund, aimed at reducing perceived risks during the construction and development phase of large infrastructure projects. This measure will likely improve private sector participation by enhancing confidence among developers and lenders.

• Monetisation of CPSE real estate assets:
  The government plans to recycle underutilised real estate assets of Central Public Sector Enterprises (CPSEs) through the formation of dedicated REITs. This approach will unlock value from existing assets while also creating fresh opportunities for commercial redevelopment.

• Expansion of healthcare education infrastructure:
  Existing institutions for Allied Health Professionals (AHPs) will be upgraded, and new AHP institutions will be established across both public and private sectors.

• Creation of Regional Medical Hubs:
  The Budget announces the development of five Regional Medical Hubs, positioning India as a preferred destination for medical tourism. This will lead to construction activity across hospitals, diagnostic centers, hospitality assets, and supporting urban infrastructure.

• New Ayurveda institutions:
  To strengthen traditional healthcare systems, three new All India Institutes of Ayurveda will be established.

• Support for veterinary infrastructure:
  A loan-linked capital subsidy scheme will be launched to support the establishment of veterinary and para-vet colleges, hospitals, diagnostic labs, and breeding facilities in the private sector.

• University Townships along industrial corridors:
  The government will develop five university towns near major industrial and logistics corridors through the challenge route. These townships are expected to integrate education infrastructure with industrial growth nodes, driving mixed-use development.

• Social infrastructure development:
  Through VGF and capital support, the government plans to establish one girls’ hostel in every district.

• Cultural and tourism infrastructure:
  The Budget proposes the development of 15 archaeological sites, including Lothal, Dholavira, Rakhigarhi, and Leh Palace, into experiential cultural destinations. This initiative will drive tourism-led construction, covering visitor facilities, interpretation centers, and supporting infrastructure.

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Focus on Purvodaya States and the Northeast

The Union Budget 2026–27 places renewed emphasis on eastern and northeastern states. Key initiatives include:

• Development of an East Coast Industrial Corridor with a major node at Durgapur
• Creation of five tourism destinations across Purvodaya states
• Launch of a scheme to develop Buddhist circuits across northeastern states

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Conclusion

The Union Budget 2026–27 provides a strong growth impetus to India’s construction industry, led by a significant increase in public capital expenditure to 12.2 Lakh INR-Crore and a continued policy focus on infrastructure-led economic expansion. Roads and railway infrastructure received a sustained push, with the Ministry of Railways securing a record allocation alongside plans to develop seven high-speed rail corridors. Despite a moderation in highway construction activity during the current financial year, the increased capital outlay toward the Ministry of Road Transport and Highways (MoRTH) underscores the government’s continued priority on road infrastructure development.

The Budget also marks a renewed and more targeted push toward high-value and technology-driven manufacturing. This will further translate into faster project announcements and higher industrial capex. Key focus segments include biopharma, semiconductors, electronics, critical minerals, chemicals, capital goods, and textiles. These segments are likely to drive sustained demand for industrial, logistics, and allied infrastructure. Data centers emerged as another key segment highlighted in the Union Budget 2026-27. With development already on a strong growth trajectory, the extension of tax holiday benefits is expected to accelerate investments further and strengthen the construction pipeline across major metros and emerging technology hubs.

Meanwhile, education, healthcare, and tourism continued to receive a fair share of policy and fiscal support, pointing toward diversified construction demand across institutional, healthcare, and hospitality assets. The housing sector also received a meaningful push through higher capital allocation to the Ministry of Housing and Urban Affairs. This was complemented by measures such as the Infrastructure Risk Guarantee Fund and CPSE asset monetisation via REITs, which are expected to improve project viability and unlock fresh investments.

Overall, the Budget lays a strong foundation for broad-based opportunities across infrastructure, industrial, institutional, and residential construction segments. However, the real impact will hinge on timely project execution, effective coordination between central and state governments, and sustained private sector participation.

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For more detailed insights, you can access the complete document BUDGET 2026-27 NIRMALA SITHARAMAN

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