India's affordable housing segment is experiencing a significant capital crunch with over 4.5 lakh affordable and mid-income homes across over 1500 stalled projects in need of immediate funding support worth close to Rs 55,000 crore, according to the latest report by ANAROCK Capital. The results highlight the need for structural financing imbalance in Indian real estate market that is increasingly dominated by high-end projects and large developers in metros, while affordable housing is underfunded.
Key Highlights
- Over 4.5 lakh stalled affordable homes need Rs 55,000 crore funding to address India’s deep housing crisis.
- Premium housing dominates launches while affordable housing supply shrinks despite strong long-term urban demand growth.
Despite the huge unmet demand for affordable housing segment, the report said that formal institutional lenders are yet to play a significant role in funding it, while the real estate sector in India is projected to become a $1 trillion industry by 2030, and finally a $5-7 trillion market by 2047. ANAROCK reckons that the entire real estate industry will need huge capital infusion of almost Rs 50 lakh crore in the next decade to maintain growth and augment infrastructure.
Affordable Housing Supply Shrinks Sharply
The demand for affordable housing segment is currently close to 25 million short of supply in India and by 2030, demand will increase by another 25 million units. However, there has been a massive drop in supply.
ANAROCK's residential market data shows that below Rs 40 lakh segment has seen a 16% decline in its share of new launch homes in Q1 2026, from 26% in 2021. Homes costing over Rs 1.5 crore are now 53% of new launches, compared to 43% in the previous year, as the developers have been shifting their focus from lower-margin projects in to premium projects.
“India’s real estate sector no longer faces a shortage of capital. The real challenge is whether this capital can reach beyond top developers and major metros to fund affordable housing and emerging Tier-II and Tier-III markets,” said Shobhit Agarwal, CEO of ANAROCK Capital.
Echoing this concern, Vishal Srivastava, Managing Director and Head of Corporate Finance at ANAROCK Capital, said: “India’s affordable housing challenge is no longer a demand problem. It is fundamentally a structural capital allocation and financing architecture issue.”
Also Read: Delhi-NCR and MMR Near Full Mall Occupancy: ANAROCK-IMAGES Report
Government Intervention Offers Partial Relief
Government backed financing mechanisms is a driver for completion of the project. Since its launch in 2019, the SWAMIH Fund, which was subsequently increased to Rs 15,530 crore, has facilitated the delivery of 58,596 homes and more than 1 lakh homes is expected.
Further, Budget 2025-26 announced SWAMIH Fund 2.0, a new blended financing initiative to build another 1 lakh stalled homes, and PMAY-Urban 2.0 to provide support to 1 crore urban houses.
Predictably, the loan market as a whole is expected to see smaller growth with assets under management rising by 15-16% for affordable housing finance companies in FY27.
Capital Flow Tilts Toward Emerging Asset Classes
Institutional investment is trending toward data centre investments, industrial parks, logistics infrastructure and the office developments in the GCC region, which are regarded as more stable and benchmarked to world class standards.
India's six-listed REITs have now achieved a total market capitalisation of over Rs 2 trillion, however, REIT penetration is still low in comparison to the global peers.
India's robust domestic demand, infrastructure development, regulatory reforms, and the growing private credit market continue to drive real estate growth despite geopolitical uncertainties and financial market instability, ANAROCK said.
But if the architecture of affordable housing financing in India is not urgently revamped, then the scenario will only worsen its urban housing shortage while high-end real estate continues to flourish.
