Budget 2026: Real estate industry seeks policy support to revive affordable housing

India's real estate market stands at a turning point. While headlines trump up record sales of high-end properties and the increasing prices of residential properties, a deep-seated crisis is taking place secretly under the surface, which makes home ownership impossible for a large number of Indians.

According to the ANAROCK Research, the Union Budget 2026 has to heal this widening gap by taking strong measures. If there is no powerful policy intervention, then India will be stuck with a two-class housing market—luxury residential for the rich and dwindling ownership chances for the middle and low-income groups.

Growth masks a worrying reality

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India’s residential real estate sector, at first sight, seems to be thriving. The total value of houses sold in 2025 was almost Rs 6 lakh crore, which was a 6 per cent rise compared to 2024, as per the data by ANAROCK Research. Institutional investments in real estate also jumped 51 per cent year-on-year (YoY) to USD 8.9 billion in 2024.

However, these headline numbers hide bad trends. The value of transactions went up; however, the actual number of homes sold decreased by 14 per cent in 2025. The luxury segment has been the main factor for growth. In the year 2024 alone, the sales of luxury homes experienced an increase of 170 per cent, which was mainly due to HNIs, NRIs and rich professionals wanting to upgrade their lifestyles and looking for ways to protect their money against inflation.

On the other hand, affordable housing that used to signal inclusive economic growth has been on a downward path.

Affordable housing in structural decline

Affordable housing’s share of total residential supply has fallen sharply from 38 per cent in 2019 to just 18 per cent in 2025. This is not a cyclical slowdown but a structural issue, the report said.

In 2018, over 52 per cent of the new housing supply in India’s top seven cities was priced below Rs 50 lakh. By 2025, that figure has collapsed to just 17 per cent. As a result, India’s urban housing shortage has ballooned to 9.4 million units and could rise to 30 million by 2030 without urgent policy action.

The impact on households is severe. The EMI-to-income ratio for average homebuyers has climbed from 43 per cent in 2020 to nearly 60 per cent today—well beyond sustainable levels. For middle-income families, the ratio has risen from 28 per cent to 40 per cent, driven by higher home prices and interest rates.

ANAROCK’s latest Consumer Sentiment Survey reveals that in Bengaluru, 42 per cent of prospective buyers looking for homes under Rs 1 crore have been priced out of the market, even as demand for budget housing rose 13 per cent YoY.

Why are developers avoiding affordable projects?

The crisis is not due to a lack of demand but unfavourable economics. Affordable housing projects typically offer developer margins of 10–12 per cent, compared with 25–30 per cent or more in luxury developments.

The combination of increasing land prices, higher prices for steel and cement, a shortage of workers, and slow processes for getting permits has made affordable housing projects not worth the money. A lot of developers are now selling mid-income projects as a luxury.

To make matters worse, the present policy framework is very old. The price limit for affordable housing has remained unchanged at Rs 45 lakh—a limit that was set in 2017 and does not show the reality of urban land and construction costs anymore. In cities such as Mumbai, Pune, Bengaluru and Delhi-NCR, even basic flats now cost much more than this cap.

Developers stopped receiving a significant incentive with the expiration of the Section 80-IBA tax holiday in 2021. Consequently, the launch of affordable housing projects has declined, thus, the market is still tight and prices are high.

New supply can be unlocked with infrastructure

The report refers to the infrastructure as an important factor that may contribute to housing affordability. The construction of metro rail, highways, ring roads, and logistics corridors would not only attract housing supply but also open up new development zones and decrease commute times.

Bengaluru, Hyderabad, Pune, and NCR have experienced multiple residential booms after every significant infrastructure announcement. Budget 2026 must hasten last mile urban infrastructure under programs like PM Gati Shakti and National Infrastructure Pipeline to increase affordable housing supply.

What does real estate expect from Budget 2026?

1) Revive section 80-IBA tax holiday

The reintroduction of a complete tax exemption on affordable housing projects under Section 80-IBA could instantly bring back the supply. The incentive, which was active from 2016 to 2021 had a catalytic effect in the creation of many affordable housing units.

The report claims that a limited-time tax exemption for the projects granting approval in the next 24–36 months would be both financially acceptable and very impactful. Every year of delay keeps around 1.5 million households deprived of moving to the formal homeownership sector.

2) Redefine affordable housing price caps

The limit of Rs 45 lakh needs to be changed so that it aligns with what is really happening in cities. As per the suggestion made in the report, the price limit should be increased to Rs 85 lakh for Mumbai and MMR, while it should be Rs 75 lakh for other big metropolitan cities.

Increasing the price ceilings but keeping the carpet area standards would not only stop the misuse but also make sure that the real middle-class buyers are the ones to benefit. The proposed change can single-handedly boost the segment of affordable housing in new launches from 18 per cent to more than 40 per cent.

3) Strengthen Credit-Linked Subsidy Scheme (CLSS)

The housing scheme, PMAY-U 2.0, provides a Credit-Linked Subsidy Scheme (CLSS) that gives direct subsidies on interest to first-time buyers but is still not fully utilized. The 2026 budget, therefore, should be used to broaden the scheme by increasing the rates of subsidy, the limits of loan, and the process of disbursal.

If the fund for CLSS is raised to Rs 10,000–15,000 crore yearly, it will be able to assist 1.5–2 million first-time buyers in the next five years, thus, giving relief to the areas with the most demand.

A defining moment for housing policy

India’s housing market stands at a crossroads. One path leads to widening inequality and shrinking homeownership for the middle class. The other promises balanced growth, expanded supply and inclusive urban development.

"India is at a perplexing point in its housing history. While headlines trump up record sales of luxury homes and rising real estate prices, a much darker story is unfolding behind the scenes. We are now looking at very real possibility of a two-tiered housing market that makes owning impossible for millions of Indians," Puri said.

This is no time for half-measures. Budget 2026 needs to take strong action to fix India's housing market, else the gap between those who can afford luxury penthouses and those who struggle to find basic homes they can afford will only widen, he added.