The coming Budget 2026 in India faces a severe housing crisis in terms of affordability, as sales in the high-end market are increasing, while there is a shortage in the mass market. Anarock, a consulting firm, points out “The EMI to income ratio has substantially escalated, rendering buying unaffordable for many borrowers. The housing shortage in urban India is increasing and risks creating a two-tier market.”
Affordability Crisis Deepens Amidst Luxury Boom:
The Indian realty sector is at a crucial crossroads with the formulation of the Union Budget for 2026 by the policymakers. Consulting firm Anarock notes a growing affordability challenge side by side with a vibrant luxury housing market. Even though the total worth of housing units sold has grown by 6% to ₹6 lakh crores in 2025, there has been a sharp decline of 14% in the number of units sold. This clearly reflects a drift away from mass housing to higher-priced units.
Luxury Market Up, Mass Market Stuck:
Contrast this with the drastic increase of 170% that luxury sales registered in 2024, thanks to the influx of high net-worth individuals and Non Resident Indians. In the top-seven cities, the market share of flats in the price bracket of below ₹50 lakh has steadily reduced from over 52% in 2018 to a low 17% in 2025. India has a shortage of 94 lakh homes in the urban sector, and this is set to soar to 3 crore in 2030, claims Anarock, unless corrective steps are taken in time.
The affordability of housing has derailed for the organized sector of the population. The EMI-to-income ratio has increased to 60% for average home buyers, a dramatic increase from 43% in 2020, a completely unsustainable ratio. Middle-class citizens must now grapple with an EMI-to-income ratio at 40%, a drastic increase since it was a measly 28%. Interestingly, a worrisome 42% of home buyers searching for houses below ₹1 crores in Bengaluru claimed they could no longer afford a purchase.
Governments Must Overhaul Policy:
The problem, Anarock identifies, lies not in the demand sector but in the supply sector. “We have margins of just 10-12% in affordable housing projects, which is completely different from the 25-30% margins in the high-end segment,” Anarock says. “The reasons for this are the rising costs of land and approvals,” which lead to increased costs and then switch to projects that have higher pricing.
Budget 2026 has a challenge with outdated policy definitions. Today, the price cap for affordable housing is Rs 45 Lacs, which is dated as of 2017 and is inadequate as it does not even include feasible projects within the periphery area. According to ANAROCK, there is a need for a city-wise adjustment with a cap of Rs 85 Lacs in the MMR area and Rs 75 Lacs for other key cities with the existing carpet area formula.
Supply Boosting and Buyer Support:
A major budget ask would be the restoration of the Section 80-IBA tax holiday for affordable housing developers, which lapsed in 2021. An incentive that previously aided in ramping up supply, Anarock recommends a limited window reintroduction to unlock the same stalled projects.
The company further urges the government to expand the Credit-Linked Subsidy Scheme under PM Awas Yojana-Urban 2.0 by increasing the limits of subsidy, enhancing the eligible loan amounts, and smoothing out the disbursal process to offset the soaring interest rates. CLSS outlays of ₹10,000-₹15,000 crore per year can facilitate up to 2 million first-time buyers over a period of five years. Similarly, speeding up urban infrastructure projects will be crucial in opening up new development zones and decongesting city cores. The absence of decisive budgetary intervention could lead India into a two-tier housing market, with millions of urban households priced out of home ownership.
