Affordable Housing in India: Challenges, Trends, and the Role of Union Budget 2025-26

Anuj Puri

Affordable housing in India was once the real estate sector’s poster child. Developers focused on designing smaller units to keep prices low and ensure steady sales. The government’s ‘Housing for All’ initiative boosted the sector with incentives for buyers and developers. By 2018-2019, affordable homes accounted for nearly 40% of total housing supply in cities like Pune, Kolkata, Chennai, and NCR, supported by lower GST rates and tax benefits.

Impact of the Pandemic

COVID-19 changed homebuyer priorities. Demand shifted toward larger, multi-functional homes with lifestyle amenities, reducing interest in smaller affordable units. The supply share of affordable housing fell sharply from 40% in 2018 to 16% in 2024. Blue-collar and entry-level buyers struggled financially, pushing many to the rental market instead of buying.

Shrinking Supply & Developer Trends

Rising land, labor, and material costs combined with low profit margins made developers focus on mid- and premium-segment housing. Cities like Bangalore now have virtually no affordable housing supply, while Hyderabad and Chennai see only a 2% share. Kolkata and MMR remain exceptions, with around 31% of upcoming units under INR 40 lakh. NCR’s share declined from 62% in 2020 to 11% in 2024, as luxury and high-end properties dominate.

PMAY – Progress and Opportunities

The Pradhan Mantri Awaas Yojana (PMAY) has made steady progress since 2015. As of January 2025, 118.64 lakh homes have been sanctioned, 90.22 lakh completed, and 112.50 lakh grounded, with nearly INR 2,00,000 Cr committed. PMAY offers interest subsidies and direct funding for house construction, but title document requirements remain a major hurdle.

The Future of Affordable Housing

Rising luxury property prices may create a turning point for affordable housing. The upcoming Union Budget 2025-26 can revive the segment through focused incentives, new construction technologies, and easier access to PMAY benefits. Strengthening affordable housing ensures a balanced real estate market, catering to all income segments.

Anuj Puri is Chairman, ANAROCK Group