Affordable Housing Crisis Deepens as Luxury Market Booms

India's real estate sector presents a contradictory picture. Record sales in luxury housing are juxtaposed against a shrinking inventory of affordable homes, creating a widening chasm that risks excluding a significant portion of the population from homeownership. Industry experts warn the country is fast approaching a sharply divided housing market.

Anuj Puri, a prominent voice in real estate analysis, states the situation is critical. "We are at risk of creating a housing market where luxury homes thrive, but ordinary Indians are locked out of homeownership," he noted. While headline figures for total property value in 2025 showed a sharp rise, institutional investments surged, these numbers mask a troubling decline in the actual number of homes sold.

The Luxury Surge

Wealthy buyers, Non-Resident Indians (NRIs), and high-income professionals are fueling the growth at the premium end of the market. Transactions for high-value properties have surged, inflating overall market values. However, Puri cautions that this growth is heavily skewed and does not reflect the broader health of the housing sector. Demand for basic, affordable homes remains largely unmet.

Affordable Homes Squeezed

Affordable housing, once the bedrock of India's residential market, has seen its supply dwindle over recent years. For many middle-income families, rising property prices coupled with increased home loan Equated Monthly Installments (EMIs) have rendered homeownership unattainable. Even in cities with robust job markets, families are finding it difficult to secure homes they can afford.

Economic and Policy Headwinds

The challenge stems from economics. Affordable housing projects offer considerably lower profit margins compared to luxury developments. Escalating land prices, rising construction costs, and protracted approval processes further diminish project viability. Compounding this are outdated policy definitions. The current price cap for affordable housing fails to reflect the realities of major metropolitan markets, impeding developers' ability to build within the prescribed limits.

Budget 2026: A Potential Lifeline

Experts believe the upcoming Union Budget 2026 holds the key to reversing this trend. Potential interventions include reinstating tax incentives for affordable housing developers to improve profitability. Revising price caps on a city-specific basis to align with current land and construction costs could also stimulate supply. Furthermore, strengthening interest subsidy schemes and simplifying access to buyer benefits can ease the financial burden on first-time homeowners.

India now faces a critical juncture. It can either allow the housing market to cater exclusively to the affluent or implement measures to ensure inclusive growth and widespread homeownership. The path forward requires decisive action and political will.