UNION BUDGET 2026 LEAVES AFFORDABLE HOUSING IN QUESTION

Union Budget 2026–27 arrived with scale and ambition. Rail corridors, highways, logistics grids and capital expenditure dominated the headlines. The numbers were big, the intent unmistakable. Yet, in the shadow of Rs. 12.2 lakh crore in infrastructure spending, one sector stood noticeably quieter: affordable housing. For years, “Housing for All” has been a political and policy touchstone. This time, however, the arithmetic tells a more restrained story.

PMAY Urban: A Subtle Retrenchment
The Pradhan Mantri Awas Yojana (PMAY) Urban 2.0, the government’s flagship affordable housing programme, saw its allocation trimmed by 5.9 percent to Rs. 18,625 crore in the 2026–27 Budget Estimates. A year earlier, the allocation stood at Rs. 19,794 crore. On paper, the Finance Minister described the allocation as support for continued expansion. In practice, the funding trajectory has been uneven. Revised estimates for 2025–26 had already reduced PMAY Urban outlays sharply to Rs. 7,500 crore, reflecting f iscal constraints and execution challenges. The contrast becomes starker when viewed against earlier budgets. Interim Budget 2024–25 had earmarked over Rs. 80,000 crore for PMAY. Budget 2023–24 had allocated nearly Rs. 79,590 crore. The broader picture suggests a tapering of intensity in a programme that has delivered more than 4.21 crore homes over the past decade, largely through credit-linked subsidies enabling low- and middle-income households to access formal housing. Demand, meanwhile, has not softened. Urban housing shortages persist, particularly in the economically weaker sections and lower middle-income brackets.

Union Budget 2026 reduces the allocation for PMAY Urban 2.0 to Rs. 18,625 crore, down from Rs. 19,794 crore last year, signalling slower fiscal momentum for affordable housing despite rising urban demand and housing shortages.

Urban Missions Lose Momentum
Affordable housing does not operate in isolation. It depends on functioning water systems, transport links, sewage infrastructure and municipal services. Budget 2026–27 reduced allocations for AMRUT and the Smart Cities Mission by roughly 20 percent, bringing the combined figure down to Rs. 8,000 crore from Rs. 10,000 crore in the previous Budget Estimates. Urban planners caution that these missions play a crucial supporting role. Without parallel investment in civic infrastructure, housing projects risk becoming disconnected from essential services, weakening long-term sustainability. The cuts may not stall projects outright, but they signal a recalibration of priorities.

A Segment Already Under Pressure
The affordable housing segment has been losing share in the broader market. According to ANAROCK data, its contribution to overall housing sales has declined from over 38 percent in 2019 to around 18 percent in 2025. CREDAI National President and MD of Ganesh Housing Corporation Ltd., Shekhar Patel expressed disappointment at the absence of new measures in Budget 2026. With no fresh interest subsidies, no tax incentives and no revision in the definition of affordable housing, he warned that the segment’s share could fall further. The definition itself remains a sticking point. Developers have long argued that price caps no longer reflect current land and construction costs in many cities. Without recalibration, projects struggle to remain viable. For India’s lower middle class and middle class, this has direct consequences. Affordable housing is not merely a commercial category; it intersects with social mobility and urban inclusion.

The Gap Between Vision and Allocation
The tension lies in timing. Infrastructure-led growth operates on a medium- to long-term horizon. Affordable housing, by contrast, responds to immediate end-user demand. Without fiscal backing, developers may continue to gravitate toward mid-income and premium segments where margins are clearer. The Budget’s silence on interest subsidies and tax relief underscores this gap. For a segment already grappling with rising input costs and tighter margins, incremental support can make a meaningful difference. Housing is both an economic asset and a social good. When allocations taper and policy signals soften, the market recalibrates quickly.

While infrastructure spending rises to Rs. 12.2 lakh crore, urban missions supporting housing see cuts. AMRUT and Smart Cities allocations fall to Rs. 8,000 crore from Rs. 10,000 crore, raising concerns about the future of affordable housing supply.

Infrastructure as Indirect Support

Dr. Niranjan Hiranandani, Chairman of the National Real Estate Development Council (NAREDCO), maintains that sustained support for PMAY continues to reinforce housing as a driver of inclusive development. He points to infrastructure expansion and capital market reforms as measures that indirectly strengthen the housing ecosystem.

Monty Joshi, Co-Founder of Sarvam Properties, views the Budget as laying the groundwork for long-term demand by expanding development into Tier-2 and Tier-3 cities. Infrastructure investments, City Economic Regions and financing reforms could lower execution risks and improve capital access for developers.

Bhavesh Kothari, Founder and CEO of Property First Realty, highlights enhanced connectivity through high-speed rail corridors and national waterways. As commuting becomes easier and regional economies expand, new housing corridors may emerge, easing pressure on metro cores.