Highlights Fund utilisation for the Ministry has declined due to high underspending on PM Awas Yojana – Urban.  In 2025-26, the Ministry is estimated to spend only 31% of its allocated budget at the revised estimate stage. Urbanisation is increasingly being driven by rapid growth of peri-urban areas and census towns.  Many schemes do not target census towns or peri-urban areas, weakening service delivery in these areas. Affordable housing in urban areas remains constrained by high land costs (up to 63% of housing cost in metros), restrictive land density regulations, and limited availability of land. Over one-third of the Ministry’s budget is allocated to metro and mass rapid transit projects, while bus availability remains limited.  Only 47,650 buses are currently serving urban residents, out of which 61% are concentrated in nine megacities.

The Ministry of Housing and Urban Affairs is the apex authority formulating policies and programmes related to housing and urban affairs.  Urban development is a state subject with the 74^th constitutional amendment proposing devolution of urban governance issues to municipal bodies.  The Ministry of Housing and Urban Affairs provides schematic and programme support to states through its schemes and programmes.  Some key areas of focus of the Ministry include: (i) urban planning, (ii) urban employment and urban poverty alleviation, (iii) planning and coordination of urban transport systems, (iv) formulation of housing policy, (v) water supply, sewerage and sanitation, and (vi) policy matters relating to municipal finances and urban local bodies.

This note examines the proposed budget allocations for 2026-27 to the Ministry of Housing and Urban Affairs and looks at some related issues.

Overview of Finances

Allocation in 2026-27[i]

In 2026-27, the Ministry has been allocated Rs 85,522 crore, higher than the revised estimate of 2025-26 by 50%.  This is due to revenue expenditure increasing by 109%.  It will now constitute 59% of total expenditure (42% in RE).  Revenue expenditure in 2025-26 was 14% lower at the revised stage largely due to (69.4%) underspending on Pradhan Mantri Awas Yojana-Urban.

2026-27 Budget Announcements[ii] Tier II and Tier III cities will be developed.  City Economic Regions will be mapped and developed on the basis of their specific growth drivers.  An allocation of Rs 5,000 crore per region has been proposed over a five-year period. An incentive of Rs 100 crore per issuance of municipal bond of more than Rs 1,000 crore has been proposed.

Table 1: Allocation towards the Ministry of Housing and Urban Affairs (in Rs crore)

	2024-25 Actuals	2025-26 RE	2026-27 BE	% change from RE 2025-26 to BE 2026-27)
Revenue	21,632	24,226	50,714	109%
Capital	31,623	32,978	34,808	6%
Total	53,255	57,204	85,522	50%

Note: BE- Budget Estimates; RE- Revised Estimates.
Sources: Expenditure Budget, Ministry of Housing and Urban Affairs, Union Budget 2026-27; PRS.

Key Expenditure Heads

The Ministry has allocated 36% of its total budget for development of mass rapid transport systems (MRTS) and metro projects in urban areas.  In addition, 26% of the total Ministry budget has been allocated for the PMAY-Urban scheme. 

Table 2: Allocation towards key schemes under the Ministry (in Rs crore)

	2024-25 Actuals	2025-26 RE	2026-27 BE	% change from RE 2025-26 to BE 2026-27
MRTS and Metro Projects	28,611	29,550	30,996	5%
PMAY- Urban and PMAY 2.0	5,865	7,900	22,025	179%
AMRUT	5,647	7,500	8,000	7%
Urban Challenge Fund	-	1,000	10,000	900%
Smart Cities Mission	2,126	-	-	-
Swachh Bharat Mission - Urban	1,893	2,000	2,500	25%
PM e-bus sewa	477	300	500	67%
PM-SVANIDHI	443	572	900	57%

Sources: Expenditure Budget, Ministry of Housing and Urban Affairs, Union Budget 2026-27; PRS.

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