India’s leading real estate developers are urging the Union government to revisit the country’s definition of affordable housing in the forthcoming Union Budget 2026-27, arguing that rising construction costs have rendered existing thresholds unviable. The industry believes that recalibrating price caps and tax policies could revive a segment critical to urban inclusion, job creation and sustainable city growth.
The developers’ association, which represents a large share of organised real estate players nationwide, has recommended doubling the current affordable housing price ceiling from Rs 45 lakh to Rs 90 lakh. According to industry representatives, the existing benchmark was introduced nearly a decade ago and no longer reflects market realities shaped by inflation, higher land prices and increased compliance costs. A senior industry official said developers have submitted formal proposals to both finance and housing authorities, emphasising that the current definition excludes a growing segment of middle-income households in major cities. “Urban wages have risen, but housing definitions have not kept pace. This mismatch is shrinking access to ownership in city centres,” the official noted. Rising input costs have been a key concern. Since the price cap was last set, developers have faced sustained increases in cement, steel, labour and financing expenses. At the same time, regulatory requirements tied to safety, energy efficiency and sustainability have added to project costs, even as they improve long-term urban resilience. Industry experts argue that revising the cap could benefit buyers as well. Homes classified as affordable attract a lower goods and services tax rate of one per cent during construction, compared with higher levies on other residential segments.
Expanding eligibility could therefore reduce the effective cost for a broader group of first-time homeowners. Beyond price thresholds, developers are also seeking relief on indirect taxes linked to construction. The industry has proposed a sharp cut in the tax rate applied to works contracts, contending that this would directly lower apartment prices and improve project viability. “Without addressing cost structures, supply will continue to lag demand,” an industry analyst said. The appeal comes at a time when affordable housing has been losing ground in large metropolitan markets such as Delhi NCR and Mumbai. Developers have increasingly pivoted towards premium and luxury housing, where demand remains strong and margins more predictable. Market data from a leading real estate consultancy shows that homes priced under Rs 45 lakh have seen slower capital appreciation over recent years compared with high-end properties, reinforcing this shift. Urban planners warn that the decline of affordable housing in city cores risks deepening spatial inequality, pushing workers farther from jobs and increasing commuting emissions. They argue that policy support must balance developer viability with broader urban sustainability goals.
As Budget 2026-27 approaches, policymakers face a familiar challenge: how to stimulate affordable housing supply without distorting markets. A recalibrated framework, industry voices suggest, could help cities grow more inclusively while aligning with India’s long-term ambitions for equitable, low-carbon urban development.
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