India’s housing market is at a critical juncture. While luxury home sales soar, affordable housing is shrinking, pushing homeownership out of reach for millions. Experts warn of a sharply divided market and see the upcoming Union Budget 2026 as a key opportunity for correction.
Key Takeaways
- Luxury home sales are surging, but overall home sales declined in 2025.
- The share of affordable housing has dropped sharply, pricing out middle-income families.
- High construction costs and outdated policy definitions make affordable projects unviable for developers.
- Budget 2026 could revive the sector through tax incentives and revised city-wise price caps.
The Illusion of a Booming Market
On the surface, India’s real estate appears robust, with rising total sales value and institutional investment. However, this growth is driven almost entirely by high-value luxury transactions, masking a decline in the actual number of homes sold. Demand from wealthy buyers, NRIs, and professionals is thriving, while the need for affordable homes remains unmet.
“This growth is heavily skewed towards high-value transactions. It does not reflect the true health of the housing market,” explains Anuj Puri.
Why Affordable Housing is Vanishing
Once the backbone of the residential market, affordable housing supply has plummeted. Soaring property prices and higher home loan EMIs have made ownership unattainable for many, even in cities with strong job markets.
“People are not choosing to stay away from housing. They are being priced out,” says Puri.
The Developer’s Dilemma
The core issue is economic viability. Affordable projects offer slim margins compared to luxury developments. Escalating land and construction costs, coupled with lengthy approvals, squeeze profits further. Outdated government price caps, which don’t reflect current metro market realities, disqualify many projects from crucial tax benefits.
“It is no longer possible to build a decent home within the current affordable housing price limits in most metros,” Puri points out.
Budget 2026: A Potential Turning Point
Policy intervention in the upcoming budget is seen as decisive. Key expectations include:
- Restoring Tax Incentives: Reintroducing benefits for developers to bridge the profitability gap in affordable projects.
- City-wise Price Caps: Revising affordable housing definitions to match the construction and land costs of individual cities.
Easing the Burden for Homebuyers
Support must also extend to buyers. Strengthening and simplifying access to interest subsidy schemes can significantly reduce the monthly EMI burden for first-time buyers, making loans more accessible.
“Lower EMIs can often be the difference between owning a home and giving up the dream altogether,” Puri says.
India faces a clear choice: continue towards a luxury-skewed market or course-correct for inclusive growth. The upcoming budget presents a critical chance to reset the nation’s affordable housing narrative.
“The solutions are known and achievable. What is needed now is the political will to act,” Puri concludes.
