Property developers have drawn up a long wish list of Budget measures to shore up the dwindling affordable housing segment – from raising the price cap from Rs 45 lakh to Rs 60 lakh and removal of GST and stamp duty to reintroduction of input tax credit.
“Where in Mumbai, do you get an apartment of 600 square feet at a price of Rs 7,500 per sq ft?” asked Niranjan Hiranandani, managing director of the Hiranandani Group and chairman of industry body Naredco, pushing for a revision of the Rs 45-lakh cap for affordable housing in urban areas.
Pradyumna Krishnakumar, executive director and interim chief financial officer, Brigade Enterprises, agreed with Hiranandani. Affordable housing must be redefined based on total home cost, with city-specific price limits, so that more projects qualify for subsidies and concessional loans, Krishnakumar said.
The tax holiday under Section 80-IBA of the Income Tax Act, which once helped affordable housing projects, expired in 2021 and has not been revived since, experts said.
Reducing Construction Costs
Murali Malayappan, chairman and managing director, Shriram Properties, said measures such as removing goods and services tax (GST), restoring input tax credit, and eliminating stamp duty could lower apartment costs by up to Rs 1,000 per square feet.
“It is important for the government to place affordability at the core of its housing agenda. Currently, the affordable and mid-market segments that are the backbone of the residential real estate are increasingly moving out of reach for the common people, leading to considerable societal imbalance,” Malayappan said.
Sales of affordable housing – those with a price of Rs 45 lakh and carpet area of 60 square metres (600 sq ft) in metros, according to official definition – have seen the maximum drop due to a combination of factors such as low supply and higher interest rates. Even the GST cut for affordable housing in September last year did not yield desired results.
Krishnakumar said that “reinstating tax relief for affordable housing developers would reignite supply.” Malayappan added that the government should also reinstate input tax credit so developers can pass on the benefits directly to homebuyers.
Hiranandani said that they want the government to support rental housing to make at least rentals affordable in big cities, if not prices.
Dwindling sales
The sale of housing units priced under Rs 50 lakh dropped 17% year-on-year in 2025, launches dropped by 28% and the quarters to sell level stood at 8.7 compared with 8.2 in 2024, according to Knight Frank India. The share of affordable housing in total sales in top seven cities came down from 38% in 2019 to 18% in 2025, according to Anarock Research.
Poor cost economics
Anuj Puri, chairman, Anarock Property Consultants, said challenges are not driven by a lack of demand but by the economics of modern real estate development.
“Affordable housing offers developers margins of only 10-12%, while luxury projects deliver 25-30% or higher. The maths is clear when you consider the rising cost of land and construction, and execution challenges. The profit margins have migrated entirely upward,” Puri said.
Puri said the cost of land in cities has risen astronomically and construction input costs for steel, cement, and skilled labour remain elevated. Complex government approval processes create further delays and uncertainty. “In this situation, a project with 12% margins is simply not viable if luxury projects in the same city offer 30% margins,” he said.
“The current policy framework, designed a decade ago, no longer reflects market realities. The price cap for affordable housing remains stuck at Rs 45 lakh — a threshold set in 2017 that bears no relation to 2025 construction costs and land prices,” he said, adding in Mumbai, a 600-square-foot apartment in peripheral areas now costs between Rs 60-75 lakh. In Pune, similar units command Rs 50-65 lakh. In Bengaluru and Delhi-NCR, the figures are equally disconnected from policy definitions.
Developers who attempt to build within this Rs 45-lakh price cap are locked out of critical tax benefits, he said.
“While residential markets have shown resilience, affordable housing continues to underperform due to declining affordability, elevated input costs, and limited end-user support. Without timely policy recalibration, demand in this critical segment risks remaining suppressed,” said Shishir Baijal, international partner, chairman and managing director, Knight Frank India.
The country must move decisively towards building a formal, long-term rental housing ecosystem. “A supportive regulatory and fiscal framework for rental housing can unlock underutilised stock, improve workforce mobility, and attract patient institutional capital into a segment that remains significantly underserved,” he said.