India’s affordable housing mission is facing significant challenges as public sector banks (PSBs) fall far short of their lending targets for economically weaker sections (EWS), low-income groups (LIG), and middle-income groups (MIG). In FY26, PSBs sanctioned around 191,000 housing loans against a target of 643,000, achieving only 29.5% of the planned goal.
Experts highlight that the gap is driven by multiple factors, including limited availability of affordable housing projects, strict lending criteria, lengthy documentation processes, and difficulties in assessing creditworthiness among lower-income borrowers. While government initiatives have encouraged home ownership, the mismatch between affordable housing supply and demand continues to impact loan growth.
Affordable housing requires stronger collaboration between financial institutions, developers, and policymakers. Expanding access to verified affordable projects, simplifying loan procedures, improving borrower awareness, and leveraging technology-based credit assessment models can help address these challenges.
The slowdown in affordable housing lending reflects a broader issue in India’s real estate ecosystem — ensuring that financial support reaches the segments that need it the most. With rising urbanisation and increasing demand for budget-friendly homes, strengthening affordable housing finance will remain critical for achieving inclusive growth and wider home ownership.
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