Affordable Housing in India Faces a Crisis: Insights Ahead of Budget 2026

Anuj Puri

India is at a critical juncture in its housing market. While headlines celebrate record sales of luxury apartments and rising real estate prices, millions of Indians face the harsh reality of inaccessible housing. Without urgent policy intervention in Budget 2026, the gap between luxury homeowners and those struggling for basic homes will only widen.

The Illusion of Growth in the Indian Housing Market

At first glance, India’s residential real estate market seems robust. In 2025, total home sales reached approximately INR 6 lakh crores, a 6% increase over 2024, according to ANAROCK Research. Institutional investments surged to USD 8.9 billion, rising 51% from the previous year.

However, beneath these numbers lies a stark disparity: the number of homes sold declined by 14% in 2025. The market now favors high-net-worth individuals (HNIs), NRIs, and wealthy professionals, while affordable housing in India is in severe decline.

Structural Challenges in Affordable Housing

Affordable housing has seen a sharp drop in market share, from 38% in 2019 to just 18% in 2025. In India’s top seven cities, homes under INR 50 lakh now constitute only 17% of new launches. This has created a housing shortage of over 9.4 million units, projected to rise to 30 million by 2030 without immediate policy action.

For average Indian families, the impact is profound. The ratio of monthly EMIs to income has risen from 43% in 2020 to 60% today. Middle-income families now spend nearly 40% of their earnings on EMIs, making homeownership increasingly unaffordable.

Why Developers Are Avoiding Affordable Housing

Economics drives the trend away from affordable housing. Developers earn 25–30% margins on luxury projects, compared to only 10–12% on budget housing. Rising land and construction costs, coupled with bureaucratic delays, make affordable projects financially unattractive.

Moreover, the government-defined price cap of INR 45 lakh for affordable homes, set in 2017, no longer reflects urban realities. In Mumbai, Pune, Bengaluru, and Delhi-NCR, a 600–900 sq. ft. apartment already costs INR 50–85 lakh. Tax incentives like Section 80-IBA expired in 2021, further discouraging developers.

Infrastructure Drives Housing Demand

While policy has lagged, infrastructure projects have consistently fueled real estate growth. Metro lines, ring roads, highways, and logistics corridors open new development zones, increase land values, and create sustainable housing demand. Cities like Bengaluru, Hyderabad, Pune, and Delhi-NCR have repeatedly demonstrated this pattern.

Budget 2026 Must Act to Boost Affordable Housing

1. Reinstate Section 80-IBA Tax Holiday

A 100% tax holiday for developers of affordable housing in India can revive supply. During 2016–2021, Section 80-IBA accelerated launches, increased developer participation, and boosted homes for the mass market. A limited-period revival for 24–36 months would create immediate impact.

2. Redefine Affordability

The INR 45-lakh cap must reflect modern urban costs:

• Mumbai/MMR: INR 85 lakh
• Delhi-NCR, Bengaluru, Hyderabad, Pune: INR 75 lakh

This would increase affordable housing launches from 18% to over 40% of new projects without compromising apartment size or standards.

3. Expand the Credit-Linked Subsidy Scheme (CLSS)

Budget 2026 should widen CLSS to support first-time buyers:

• Raise subsidy rates to match current lending rates
• Increase loan limits (INR 8–10 lakh for EWS/LIG, INR 15–18 lakh for MIG)
• Simplify application and disbursement processes

This could directly help 1.5–2 million homebuyers over the next five years.

4. Accelerate Urban Infrastructure

Fast-tracked metro expansions, suburban rail, ring roads, and logistics corridors will improve connectivity, reduce costs, and increase housing supply in growing cities.

Union Budget 2026: A Turning Point for Inclusive Housing

India’s housing market is at a crossroads. One path leads to widening inequality—luxury apartments for the wealthy and rental or informal housing for others. The other path, enabled by Budget 2026, strengthens affordable housing supply, urban infrastructure, and inclusive growth.

Time-tested interventions like tax incentives, CLSS, and updated affordability definitions can make homeownership possible for millions of Indian families. Delay in action will perpetuate housing shortages, financial exclusion, and urban inequality.

Anuj Puri is Chairman – ANAROCK Group