India's Affordable Housing Crisis: Urgent Need for Policy Reset
India’s affordable housing segment is rapidly shrinking within the country’s residential real estate market, raising concerns over a widening urban housing gap and triggering calls for a policy reset to revive supply and demand.
According to data from ANAROCK, affordable homes — priced below Rs 40 lakh — accounted for just 18 percent of all housing sales in the top seven cities in 2024, nearly half of the 38 percent share recorded in 2019. The decline has been equally sharp on the supply side, with the segment’s share in new launches falling from 40 percent in 2019 to 16 percent in 2024.
Latest data from Knight Frank underlines the slowdown. Sales of homes priced below Rs 50 lakh declined 17 percent year-on-year in 2025, while new launches in the category dropped an even steeper 28 percent.
Affordable housing definition under scrutiny
Developers say the current definition of affordable housing no longer reflects market realities, especially in major urban centres where land, construction, and compliance costs have risen sharply over the last few years. The government defines an affordable house as a home priced up to Rs 45 lakh with a carpet area of up to 60 sq m in metros and 90 sq m in non-metros.
Industry stakeholders are now pushing for city-specific affordability thresholds linked to local income levels and property prices. Confederation of Real Estate Developers Associations of India (Credai) national president Shekhar Patel said the existing Rs 45 lakh price cap for affordable housing, introduced in 2017, is outdated, given the sharp rise in property prices in urban India.
“The Rs 45-lakh cap was introduced in 2017 for affordable housing and should now be raised to a minimum Rs 90 lakh to revive the affordable segment. We have been demanding this and in the last budget again, we had submitted this recommendation,” Patel told Moneycontrol. He added that affordable housing should be defined primarily by apartment size rather than price.
“For an Indian family the requirement is at least a three-bedroom home. The affordability for this requirement is a different thing. A compact 3-BHK is typically constructed in 1,000 square feet. So, around 90 square metre is that basic requirement of a home for any Indian,” he said. The government should incorporate these changes in the affordable housing definition to make the segment viable, Patel said.
Developers are also seeking the restoration of tax incentives for affordable housing projects, lower approval and development charges, faster clearances, infrastructure support, and easier financing access for both developers and first-time buyers.
Premium housing shift
Real estate consultants say rising input costs and shrinking margins have gradually pushed developers toward mid-income and premium housing segments, where profitability remains higher. “Construction costs have risen significantly post-pandemic due to higher prices of cement, steel, labour, and land. At the same time, homebuyers in major cities have increasingly gravitated toward larger homes and lifestyle-driven projects, encouraging developers to focus on premium inventory,” said a Delhi-NCR based real estate consultant.
As a result, affordable housing launches have slowed even as luxury and high-end housing continue to record strong sales in cities such as Mumbai, Bengaluru, Delhi-NCR, and Hyderabad, the consultant, who spoke on condition of anonymity, said.
Urban housing shortage could worsen
Market observers warn that continued weakness in the affordable housing segment could aggravate urban housing shortage. Industry estimates suggest the country could face a shortage of more than two crore affordable homes by the end of the decade if supply does not keep pace with urbanisation and migration trends.
Reviving the segment will require coordinated intervention involving policy support, financing reforms, and infrastructure development to make projects financially viable again, experts say.
