Budget 2026: Addressing India's Housing Crisis with Tax Breaks and Affordable Homes

India is at a critical juncture in its housing market, where the luxury segment is booming, but the affordable housing sector is crumbling. According to ANAROCK Chairman Anuj Puri, the country is at a tipping point where housing growth is benefitting only the wealthy, while millions are being priced out of the market.

Penthouses are flourishing, but the supply of affordable homes is vanishing. While luxury home sales surged by 170% in 2025, the total number of homes sold dropped by 14%. This stark contrast highlights a significant issue: demand exists, but affordability is a major barrier.

The supply of affordable housing has collapsed dramatically. In 2018, over half of new homes were priced under Rs. 50 lakh. By 2025, only 17% of new homes fit this bracket, signaling a structural, not cyclical, failure in the market. This trend is particularly concerning as it indicates a long-term shift away from affordable housing.

India’s urban housing shortage is exploding, with 9.4 million homes missing and an estimated 30 million homes needed by 2030. Without Budget-led intervention, India’s cities risk an unprecedented housing deficit that will worsen inequality and informal living conditions.

Homeownership is becoming increasingly unsustainable, with EMIs now consuming up to 60% of middle-income families' income. Rising prices and interest rates are crushing the purchasing power of these families, making homeownership a distant dream for many.

Developers are abandoning affordable projects due to slim profit margins. In today’s market, 12% margins are not feasible. High land prices, costly materials, slow approvals, and outdated policy caps are pushing developers toward luxury housing, which offers 25-30% margins.

To revive the affordable housing sector, Budget 2026 must reintroduce Section 80-IBA, which provides a 100% tax holiday for affordable housing developers. This measure could immediately unlock stalled projects and boost the supply of affordable homes.

Redefining 'affordable' to match urban reality is also crucial. The current Rs. 45 lakh cap is obsolete. Budget 2026 should raise the cap to Rs. 75-85 lakh in metropolitan areas while retaining size norms to protect genuine middle-class buyers.

Budget 2026 is India’s housing inflection point. Anuj Puri warns that delaying reforms will cement a divided market—luxury for a few, exclusion for millions—making this budget a defining moment for the country’s housing future. Immediate action is needed to prevent a generation from being locked out of the housing market.