Why Budget 2026 should raise affordable housing price cap to ₹75-85 lakh: Expert explains

Puri says the ₹45-lakh price cap for affordable housing is economically divorced from urban India's ground realities. These thresholds should be raised substantially and differentiated by city.

According to Puri, for Mumbai and the Mumbai Metropolitan Region (MMR), the affordable housing cap needs to be increased to ₹85 lakh. For other major metro cities like Delhi-NCR, Bengaluru, Hyderabad, Pune, it should be no less than ₹75 lakhs.

He says that these numbers are not arbitrary but reflect the actual current construction costs and land prices in these cities. A modest, well-designed 2-bedroom apartment with basic amenities is impossible within the INR 45-lakh cap in any major metropolitan area.

However, the redefinition of affordable housing must retain the size norms and intent of the original affordable housing mandate. The goal should not be to create luxury loopholes but to ensure that first-time, middle-class homebuyers benefit from the tax benefits and subsidized financing they urgently need.

"Raising the price cap to ₹75-85 lakh while keeping the carpet area norms at 60-90 square meters would increase the number of homes that could be built from about 18% of current launches to more than 40%. This one policy change can potentially have the effect of immediately attracting more developers, and free up a lot of supply that has been held back till now," Puri says.

According to Puri, the most direct and immediate tool the government has at its disposal is to bring back the 100% tax holiday for developers of affordable housing under Section 80-IBA. This incentive, which expired in 2021, was very effective at getting more developers on board to launch more affordable housing projects.

"When Section 80-IBA was active (2016-2021), it played a critical catalytic role. Developers could undertake affordable housing projects with reasonable profit expectations, knowing that tax benefits would bridge the margin gap between affordable and mid-income projects. A limited-period tax holiday for Section 80-IBA projects approved within a defined window (say, 24-36 months) would be a high-impact, fiscally defensible intervention," he says.

The Credit-Linked Subsidy Scheme (CLSS) was revived and reintroduced as part of the revamped Pradhan Mantri Awas Yojana – Urban 2.0 (PMAY-U 2.0) in Union Budget 2024, when the FM announced its relaunch with updated benefits and eligibility criteria.

Union Budget 2025 brought back part of this plan, which gives interest subsidies of up to ₹1.80 lakh to eligible beneficiaries in the EWS, LIG, and some MIG categories.

Puri suggests that Budget 2026 should widen and strengthen this support.

"The original CLSS framework, which was stopped in 2022, was very simple - eligible homebuyers got direct interest subsidies added to their loan accounts right away, which lowered their EMIs and made homeownership more affordable," says Puri.

"This subsidy cut interest rates by 6.5% for EWS and LIG borrowers for loans of up to INR 6 lakhs with tenures up to 20 years. For mid-income home loan borrowers, subsidies of 3-4% on larger amounts often make the difference between affordability and unaffordability," he adds ​ According to the expert, Budget 2026 should widen CLSS in three ways:

• Raise the subsidy rates a little to keep up with higher current lending rates

• Raise the loan limits to match the current property prices (₹ 8-10 lakh for EWS/LIG and ₹15-18 lakh for MIG)

• Simplify and streamline the application and disbursement process to reduce friction and ensure that benefits get to the target population seamlessly.

"The cost of expanding CLSS would be high, but it would be worth it. Amid the massive shortfall of affordable housing units, if the CLSS paid out INR 10,000–15,000 crore every year, it would directly help 1.5–2 million first-time homebuyers over the next five years. This is real, targeted help for the group that needs it the most," Puri says.