If India Removes the 45 Lakh Affordable-Housing Cap, What Should Replace It?

CREDAI wants India to stop defining affordable housing through a fixed ₹45 lakh price ceiling.

At first glance, the argument is straightforward.

A ₹45 lakh home is much harder to deliver in expensive urban markets when land, approvals, construction and financing costs have increased.

But removing the ceiling creates a second, more difficult question:

What makes a home “affordable” once price is no longer part of the definition?

That is the more important policy debate.

India already uses different definitions of affordable housing across taxation, government housing programmes and bank lending. A policy reset could simplify this system.

It could also make it more fragmented if a new definition is introduced without aligning the benefits attached to it.

The ₹45 lakh problem is real, but it is only one part of the problem

CREDAI President Shekhar Patel said at NATCON 2026 that the industry wants the ₹45 lakh ceiling removed.

Moneycontrol and The Economic Times report CREDAI proposing an area-only test:

• up to 60 sq m in metros; and
• up to 90 sq m outside metros.

Under that approach, the sale price would no longer determine whether the dwelling qualified as affordable housing.

For developers, that has an obvious advantage.

A compact project in an expensive city would not automatically lose its affordable classification because its selling price crossed ₹45 lakh.

But from a public-policy perspective, removing the price test also creates a targeting problem.

A small home can be expensive.

If the government attaches tax concessions, subsidies, cheaper finance or planning incentives to the “affordable” label, policymakers need to decide whether size alone is sufficient evidence of affordability.

India already has several answers to the same question

NITI Aayog’s A Comprehensive Framework to Promote Affordable Housing explicitly recognises that India lacks one uniform definition.

The frameworks it documents illustrate the problem.

Framework	Area / housing test	Value or financing test
PMAY-U 2.0, as documented by NITI Aayog	Up to 60 sq m in metros and 90 sq m outside metros	Value up to ₹45 lakh
2019 GST affordable-housing framework	Up to 60 sq m in metros and 90 sq m outside metros	Value up to ₹45 lakh
NITI committee working definition	Up to 60 sq m in metros and 90 sq m outside metros	₹60 lakh in metros and ₹45 lakh outside metros
RBI Priority Sector Lending, individual housing	Eligibility varies by population category	Maximum dwelling cost ₹63 lakh, ₹57 lakh or ₹44 lakh depending on population

These frameworks are designed for different purposes, so they should not be treated as interchangeable.

But their differences demonstrate why changing the ₹45 lakh threshold is not simply a matter of editing one definition.

NITI Aayog has already moved away from a single national price limit

The NITI Aayog committee used a ₹60 lakh value ceiling for metropolitan areas and ₹45 lakh outside metros in its own working definition.

Compared with the ₹45 lakh national benchmark, ₹60 lakh is ₹15 lakh higher, or about 33% more.

That is a Vantage-derived comparison based on NITI Aayog’s published thresholds.

The committee nevertheless stopped short of recommending one universal affordability test for every purpose.

It explicitly noted that India's socio-economic diversity makes a single uniform definition problematic.

This is important.

The fundamental problem may not be that ₹45 lakh is the wrong number.

It may be that one national price number is being asked to describe fundamentally different housing markets.

RBI already uses a location-sensitive approach

RBI’s 2025 Priority Sector Lending rules offer an alternative model.

For qualifying individual housing loans, the maximum dwelling cost is:

• ₹63 lakh in centres with populations of 50 lakh and above;
• ₹57 lakh in centres with populations of 10 lakh to below 50 lakh; and
• ₹44 lakh in smaller centres.

The loan limits also vary.

That framework recognises that housing costs differ by market size.

It does not prove that RBI’s thresholds should become the national affordable-housing definition.

But it demonstrates that the policy system already has a mechanism for applying different monetary thresholds to different markets.

For policymakers, a location-sensitive price ceiling could therefore be one alternative to both the existing ₹45 lakh national cap and CREDAI’s proposed area-only approach.

Area-only classification solves one problem and creates another

Suppose the government removes the price ceiling entirely.

Developers gain greater flexibility because construction economics no longer have to fit inside an administratively fixed transaction value.

That may encourage more supply to seek an affordable-housing classification.

But unless another affordability screen is introduced, the connection between the label and the buyer’s ability to pay becomes weaker.

A unit could meet the carpet-area test while being priced far beyond the reach of the households affordable-housing policy is intended to support.

The issue becomes especially important if fiscal benefits accompany the classification.

The 2019 GST framework applied an effective 1% GST rate without input tax credit to qualifying affordable residential properties.

A future housing-policy definition should not be assumed automatically to rewrite this tax treatment.

GST changes require their own legal and notification process.

The same principle applies to lending, subsidies and income-tax incentives.

Changing a housing-policy definition does not by itself establish that every linked fiscal or financial rule has changed.

Household income is the missing side of the equation

NITI Aayog describes housing as generally affordable where housing-related expenditure remains below roughly 30-40% of household income.

That moves the debate from the property to the household.

A ₹60 lakh home can be affordable for one buyer and unaffordable for another.

Likewise, a ₹40 lakh home can impose an unsustainable EMI burden on a lower-income household.

An income-linked model therefore has a stronger conceptual connection to actual affordability.

But it has practical problems.

NITI Aayog notes that reliable city-level household-income information is often unavailable.

That makes a national income-to-housing-cost system harder to administer consistently.

The policy trade-off is therefore between precision and simplicity.

Price and area tests are easier to verify.

Income-based affordability is economically more meaningful but administratively more demanding.

The strongest policy may use more than one test

The evidence suggests four broad options.

Option 1: Keep ₹45 lakh

This is the simplest administratively, but it risks excluding projects in markets where development costs have moved materially above the threshold.

Option 2: Raise the national ceiling

This preserves a price test but eventually creates the same problem again if prices continue rising.

Option 3: Remove price and use only carpet area

This is CREDAI’s position in multiple current reports.

It improves developer flexibility but risks classifying expensive small apartments as affordable unless benefits are separately targeted.

Option 4: Use location, size and household economics together

A city-sensitive system could use different price thresholds by market while retaining carpet-area limits and income criteria for buyer-facing benefits.

This would be more complex, but it could separate two questions that are currently being combined:

Is this an affordable-housing project?

and

Is this household eligible for affordable-housing support?

That distinction may prove more useful than searching for one perfect national price ceiling.

The 14% figure should not drive policy by itself

CREDAI says affordable housing's share of residential sales has dropped to around 14%.

That is an important warning signal, but it should not be interpreted as a complete measure of India's affordable-housing shortage.

NITI Aayog itself says India does not have comprehensive and up-to-date official affordable-housing demand and supply data.

Private market datasets also classify affordable housing using different price bands.

For example, a consultant may call homes below ₹40 lakh affordable for market-analysis purposes while a government programme applies different eligibility criteria.

Those datasets cannot automatically be combined.

This makes policy evaluation harder.

A redefinition could mechanically increase the number of units classified as “affordable” without increasing the number of households that can genuinely afford to buy them.

Developers need to watch the incentives, not only the definition

For developers, the most important question is what comes with the label.

NITI Aayog’s wider recommendations include measures involving:

• higher FAR;
• dedicated affordable-housing zones;
• land and approval reforms;
• cheaper capital;
• tax incentives;
• credit guarantees;
• rental housing; and
• changes to stamp-duty and registration costs.

A broader definition paired with meaningful economic incentives could alter project feasibility.

A broader definition on its own may do much less.

Vantage’s earlier analysis of “India May Need 15 Crore More Urban Homes by 2047: CREDAI” shows why this matters: the scale of future urban housing need is substantially larger than what can be addressed by relabelling existing product.

Homebuyers should distinguish eligibility from affordability

For buyers, an “affordable housing” classification can sound like a statement about price.

It may instead be an administrative category used to determine whether a unit or project qualifies for a particular programme.

Actual affordability still depends on:

• household income;
• down payment;
• interest rate;
• loan tenure;
• EMI;
• maintenance costs;
• transport costs;
• stamp duty and registration; and
• other household obligations.

A revised definition needs to make that distinction clear.

Otherwise, widening the category could improve industry eligibility while doing relatively little for the households facing the greatest affordability pressure.

Lenders already operate with a more differentiated system

RBI’s population-based thresholds demonstrate that housing finance can accommodate geographic variation.

For lenders and housing finance companies, any new affordable-housing policy will need to be assessed against existing priority-sector classification rather than assumed to replace it.

A harmonised system could reduce complexity.

Separate definitions may still be justified where programmes have different objectives.

What matters is that policymakers state clearly which definition controls which benefit.

What would make the policy reset meaningful

The strongest version of a new affordable-housing framework would answer five questions.

1. What makes the dwelling affordable?
   Area, price, location or a combination?

2. Who is the policy trying to help?
   EWS, LIG, MIG or a broader urban buyer base?

3. Which benefits attach to the project?
   Tax, FAR, land, approvals or cheaper finance?

4. Which benefits attach to the buyer?
   Interest subsidy, credit guarantees, stamp-duty relief or other assistance?

5. How will the government measure success?
   Units launched, homes completed, households served, EMI burden or another affordability measure?

Without those answers, removing the ₹45 lakh ceiling may improve the definition without solving the underlying affordability problem.

The decision to watch

CREDAI has created momentum for a policy reset.

But there is not yet an official government proposal.

The most consequential decision will not be whether policymakers accept or reject the number ₹45 lakh.

It will be whether India moves towards a definition that recognises that Mumbai, Bengaluru, Kolkata, a Tier-II city and a lower-income household cannot all be described through the same affordability test.

That would turn the debate from a price-cap adjustment into a broader redesign of how India targets affordable housing.

Sources

Click on article title to view article.

“Centre likely to revise affordable housing policy in six months, says CREDAI” published on 3 October 2026 in Moneycontrol

“CREDAI says unable to build affordable homes due to high input cost, taxes; seeks govt sops” published on 2 October 2026 in The Economic Times

“Credai stresses Bengal’s real estate potential, calls for affordable housing reform” published on 2 October 2026 in The Times of India

“A Comprehensive Framework to Promote Affordable Housing” published on 7 January 2026 in NITI Aayog

“Recommendations of the 33rd GST Council meeting” published on 24 February 2019 in Press Information Bureau

“Master Directions - Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2025” published on 24 March 2025 in Reserve Bank of India

Related Vantage Coverage

Click on article title to view article.

“India May Need 15 Crore More Urban Homes by 2047: CREDAI” published on 22 August 2026 in Vantage-Radar

“Homes priced at Rs 1.5 crore-Rs 3 crore emerge as key housing segment” published on 17 August 2026 in Vantage-Radar

“Tamil Nadu unveils My Home scheme to build 1 lakh affordable houses” published on 10 August 2026 in Vantage-Radar

Evidence Caveats

CREDAI, rather than the Union government, is the source of the reported six-month policy expectation.

No official draft reviewed for this article confirms the final definition, timetable or benefits.

Current media reports contain an unresolved discrepancy about CREDAI’s preferred thresholds. Moneycontrol and The Economic Times report removal of the price cap with 60 sq m and 90 sq m area limits. The Times of India reports a ₹90 lakh ceiling and 90 sq m / 120 sq m limits.

The approximately 33% increase between ₹45 lakh and NITI Aayog's ₹60 lakh metropolitan working threshold is a Vantage-derived comparison.

The 14% affordable-housing sales share is an industry-reported figure and does not come with a sufficiently detailed methodology in the current reports to compare directly with every private market dataset.

NITI Aayog explicitly notes the absence of comprehensive, current official demand and supply data for affordable housing.

Unavailable metrics include:

• number of units that would become newly eligible under CREDAI’s proposal;
• project-level profitability impact;
• fiscal cost of wider tax eligibility;
• expected reduction in home prices;
• expected increase in supply;
• expected increase in buyer eligibility;
• household-income distribution by city; and
• final government implementation timetable.