Budget 2026-27: Focus on Tier-II Cities, Affordable Housing Lags

The Union Budget 2026–27 reinforces the government’s urbanization push by prioritizing infrastructure development in tier-II and tier-III cities, expected to drive growth in the real estate sector alongside tier-I markets.

Experts believe this will diversify growth opportunities for real estate developers. However, the budget has left the affordable housing sector disappointed due to the absence of changes in the definition of affordable housing.

The industry had been hoping for a revision of the price cap, which currently stands at Rs. 45 lakh.

Key Highlights

• Budget 2026–27 prioritizes tier-II and tier-III cities for real estate growth
• PMAY Urban 2.0 allocation saw a 5.9 percent decline, disappointing affordable housing proponents
• Credai calls for revision of the affordable housing definition to avoid market share decline

They are seeking an increase to Rs. 80–90 lakh.One of the key announcements, the government’s flagship Pradhan Mantri Awas Yojana (PMAY) Urban 2.0, received a 5.9 percent reduction in allocation for the fiscal year, amounting to ₹18,625.05 crore, compared to ₹19,794 crore in 2025–26.

Despite the marginal decrease in funding, Credai welcomed the government’s focus on infrastructure but expressed deep disappointment over the lack of tangible measures for affordable housing.

Shekhar Patel, President of Credai, warned that without revising the outdated definition of affordable housing, its share in the market could further decline, from 18% to nearly 12% of total housing supply. This represents a setback for a sector that’s been urging reform for sustainable growth.

"This is a serious warning sign for India's lower middle class and middle class. CREDAI believes that affordable housing is not a welfare scheme - it is economic infrastructure. It is a major driver of employment, consumption, and social stability," Patel said.

“Rising construction costs and land prices, without corresponding policy support, are pushing developers away from this segment. If affordable housing supply continues to weaken, the consequences are clear: higher rentals, longer commutes, and growth of informal housing," Patel said.

Anurag Mathur, CEO, Savills India also pointed out that the twin needs of additional incentives for affordable housing and measures to increase disposable incomes remain areas for further policy attention.

Ramani Sastri - Chairman & MD, Sterling Developers said that the sector was expecting further measures to improve housing affordability, including expanded definitions for affordable housing, targeted incentives for first-time homebuyers.

Anuj Puri, chairman, ANAROCK Group said that from a real estate perspective, the Budget has delivered limited direct but various indirect benefits - acting more as a growth catalyst than an instant rescue cavalry.

Also Read: Affordable Housing Demand Drops Sharply in 2025

“One major disappointment for the real estate sector was that there were no major announcements for affordable housing, which has been in free fall since the pandemic. ANAROCK data indicates that the sales share of affordable housing plummeted after the pandemic - from over 38% in 2019 to 26% in 2022 to just around 18% in 2025,” he said.

Source:  HT Real Estate News