India’s residential real estate sector is sending out contradictory signals. On one hand, luxury properties are being snapped up at unprecedented prices, while on the other, the dream of owning a modest, affordable home is steadily slipping beyond the reach of a vast section of the population. This growing imbalance has prompted industry leaders to warn that the country is drifting towards a deeply polarised housing market.
According to Anuj Puri, a leading real estate industry expert, the divide between premium housing and affordable homes is expanding at an alarming pace. He cautions that India risks ending up with a market where high-end residences flourish, but average citizens find themselves permanently excluded from homeownership.
At first glance, the sector appears to be booming. Property sales in value terms rose sharply in 2025, and institutional investments flowed into real estate at robust levels. These figures, however, present a misleading picture. Beneath the surface, the overall number of housing units sold actually declined, even as luxury transactions surged. The momentum is being driven largely by affluent buyers, non-resident Indians and high-income professionals, rather than by broad-based demand.
Puri explains that this concentration of growth at the top end masks the underlying stress in the housing ecosystem. While headline numbers suggest strength, they do not accurately reflect the health of the market for the majority of homebuyers, especially those seeking reasonably priced homes.
Affordable housing, which once formed the backbone of India’s residential supply, has seen its share shrink significantly in recent years. As a result, fewer homes are being built within the price range accessible to middle-income and lower-middle-income families. Rising property prices combined with higher home loan EMIs have made ownership increasingly unaffordable for many households.
Even in cities witnessing strong economic and employment growth, families are finding it difficult to purchase homes that align with their incomes. Puri stresses that this is not a case of buyers opting out of the market by choice; instead, many are being forced out because prices have simply moved beyond their reach.
From the developers’ perspective, the shift towards premium projects is driven by economic realities rather than a lack of demand for affordable homes. Luxury housing offers significantly higher profit margins, while affordable projects are squeezed by escalating land prices, construction costs and long approval timelines. These pressures have made such developments far less viable.
Policy gaps have further aggravated the situation. The existing definition and price caps for affordable housing are outdated and fail to account for present-day costs in major urban centres. As a result, developers struggle to qualify for incentives, even when they aim to build reasonably priced homes. Puri notes that in many metropolitan areas, constructing a decent-quality home within the current affordable housing limits is no longer feasible.
Experts believe the Union Budget 2026 presents a crucial opportunity to correct this imbalance. Reintroducing targeted tax incentives for affordable housing projects could help bridge the profitability gap and encourage developers to return to this segment. Updating price caps on a city-specific basis, in line with actual land and construction costs, would also help boost supply without compromising the objective of affordability.
Equally important is support for homebuyers. Strengthening interest subsidy schemes, simplifying eligibility criteria and ensuring smoother access to benefits could significantly ease the financial burden on first-time buyers. Lower monthly EMIs, Puri points out, can often determine whether a family is able to buy a home or is forced to abandon the aspiration altogether.
India now stands at a crossroads. It can either allow its housing market to become increasingly tilted in favour of luxury buyers, or it can intervene to restore balance and promote inclusive growth. The remedies, according to industry experts, are well understood and entirely achievable.
What remains uncertain is whether there is sufficient political resolve to act decisively. Many see the Union Budget 2026 as a pivotal moment to revive and redefine India’s affordable housing narrative before the divide becomes irreversible.
