Digital Real Estate: How Budget 2026 can revive affordable housing, Anuj Puri decodes

India's housing sector, a critical pillar of its economy, is currently at a crossroads, facing a paradoxical situation: a booming luxury market coexisting with a severe crisis in affordable housing. This deepening inequality, as highlighted by expert Anuj Puri, poses significant challenges for the nation's social fabric and economic stability. Understanding this requires delving into its background, the current dynamics, key players, and policy implications. Historically, India's real estate sector has been a major contributor to its GDP, generating employment and stimulating demand in allied industries like cement, steel, and construction. Post-economic liberalization in 1991, rapid urbanization and increasing disposable incomes fueled a housing boom. However, this growth was often skewed, with formal housing predominantly catering to the middle and upper-income segments. The government, recognizing the housing deficit, launched ambitious initiatives like the Pradhan Mantri Awas Yojana (PMAY) in 2015, aiming for 'Housing for All by 2022' (later extended). This scheme, with its urban (PMAY-U) and rural (PMAY-G) components, sought to provide affordable housing through credit-linked subsidies, in-situ slum redevelopment, and beneficiary-led construction. What we are witnessing now is a stark divergence. The luxury housing segment is thriving, driven by high-net-worth individuals and investors, often viewing real estate as a stable asset during economic uncertainties. In contrast, the supply of affordable housing has plummeted. Several factors contribute to this crisis. Firstly, surging Equated Monthly Installments (EMIs) due to rising interest rates, primarily influenced by the Reserve Bank of India's (RBI) monetary policy tightening to combat inflation, have made home loans less accessible. The RBI's repo rate hikes, for instance, directly translate to higher lending rates for banks and housing finance companies (HFCs). Secondly, developers are increasingly abandoning low-margin affordable housing projects in favor of more lucrative luxury ventures. This shift is driven by escalating land acquisition costs, high prices of construction materials (like steel and cement), and increasing labor wages, making affordable projects less profitable and riskier. Consequently, the unmet demand for affordable homes among the middle-class and lower-income groups continues to grow, exacerbating the housing shortage. Several key stakeholders are involved in this complex scenario. The **Central and State Governments** are crucial in policy formulation, providing subsidies, developing infrastructure, and regulating the sector through bodies like RERA (Real Estate (Regulation and Development) Act, 2016). The **Reserve Bank of India (RBI)** influences affordability through its monetary policy and interest rate decisions. **Real Estate Developers and Builders** are the supply-side actors, whose investment decisions directly impact the availability of different housing segments. **Financial Institutions** (banks and HFCs) provide the necessary capital through home loans. Finally, **Homebuyers**, particularly from the middle-class and economically weaker sections (EWS) and low-income groups (LIG), are the ultimate beneficiaries (or victims) of these market dynamics. This situation carries profound significance for India. Economically, the collapse of affordable housing can hinder overall economic growth, as the construction sector is a major employment generator and contributes significantly to GDP. A slowdown in this segment can have ripple effects across allied industries. Socially, it deepens inequality, denying millions the fundamental right to dignified housing, which is implicitly linked to the Directive Principles of State Policy (DPSP) in the Indian Constitution, particularly **Article 38** (promoting welfare of the people by securing a social order based on justice) and **Article 47** (raising the level of nutrition and the standard of living). Lack of affordable housing leads to increased informal settlements, slums, and inadequate living conditions, impacting public health, education, and overall quality of life. Politically, it undermines the government's commitment to inclusive growth and 'housing for all', potentially leading to public discontent. Looking ahead, Budget 2026 is seen as a critical opportunity to course-correct. Recommendations include reviving incentives for affordable housing developers, perhaps through tax breaks or easier access to credit, and expanding infrastructure in peripheral areas to open up new land parcels for development. Updating affordability norms is essential, as existing income definitions for EWS, LIG, and MIG might be outdated given inflation and rising costs. Strengthening subsidies, such as enhanced credit-linked subsidy schemes, could make homeownership more accessible. The effective implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA), which brought much-needed transparency and accountability to the sector, will also be vital to rebuild trust among homebuyers and investors. Failure to address this disparity could lead to further concentration of wealth, increased urban poverty, and a growing divide between the privileged and the struggling middle class, challenging India's journey towards truly inclusive development. Constitutional provisions like the DPSP, though non-justiciable, provide the guiding principles for the state to ensure a just social and economic order. Policies like PMAY, the Affordable Housing Fund (AHF) under NHB, and tax incentives under the Income Tax Act (e.g., Section 80-IA for affordable housing projects, though frequently reviewed) are direct efforts to operationalize these principles. The challenge lies in making these policies more effective and responsive to the evolving economic landscape and market realities.