NOIDA, India—Half a million unfinished apartments are stuck in financial limbo in India, dashing the dreams and the spending of a middle class that was supposed to be spearheading India’s economic rise.

Wish Town, a development in the New Delhi suburb of Noida, encapsulates the plight of middle-class Indians who sank their life savings into the promise of life in a green and neatly ordered suburb. Hundreds of empty townhouses and apartment towers, half-built and stained by mold from monsoon rains, stare down at what used...