Affordable Housing Faces Growing Buyer Discontent: ANAROCK-FICCI Survey Reveals 53% Dissatisfaction
Accessibility, Quality Issues, and Compact Units Leave Buyers Unimpressed
Mumbai, 21 October 2024: The affordable housing segment, once touted as the backbone of the real estate market, is now struggling to retain buyers, with 53% of prospective homeowners dissatisfied with available options. The ANAROCK-FICCI Homebuyer Sentiment Survey for H1 2024 sheds light on major deterrents, including poor project accessibility, inferior construction quality, and cramped unit sizes.
According to Anuj Puri, Chairman of ANAROCK Group, the dissatisfaction runs deep. “Accessibility is the leading concern, with 92% of unhappy buyers citing poor project locations as a significant drawback. Additionally, 84% of respondents expressed frustration with the low construction quality, and 68% were discouraged by the small unit sizes.”
Supply Shrinks as Demand Wanes
The decline in demand has led to a steep drop in new affordable housing projects. Data from ANAROCK reveals that affordable housing projects accounted for just 17% of total new launches by the third quarter of 2024, compared to 26% in 2021. Pre-Covid, this segment made up 40% of total housing launches, reflecting a sharp contraction.
Puri adds, “Buyers today are looking for larger homes despite rising property prices. Over 51% of respondents now prefer 3BHK units, while only 39% would consider a 2BHK. This trend is particularly strong in cities like Chennai, Hyderabad, Delhi-NCR, and Bengaluru, where demand for larger units is high. On the other hand, 2BHK units remain the preferred choice in markets such as Kolkata, Mumbai Metropolitan Region (MMR), and Pune.”
Buyers Move Away from Ready Homes
The survey reveals a notable shift in buyer preferences toward under-construction projects. The demand ratio for ready-to-move (RTM) homes to new launches now stands at 20:25, compared to 46:18 in 2020. This shift is attributed to buyers’ growing trust in listed and reputed developers, who are expected to deliver on time.
Investors Turn to Rentals for Steady Returns
The survey highlights that 57% of real estate investors are focusing on rental income as a key investment driver. Rental rates have surged by over 70% in key micro-markets over the past two years, making rental returns an attractive proposition.
“Rental income has become a crucial factor for investors,” Puri notes. “With demand for rental housing increasing, investors are strategically targeting areas with high rental yield.”
Premium and Luxury Housing Gain Momentum
The interest in affordable housing may be on the decline, but premium and luxury segments are thriving. According to the survey, 45% of respondents are now interested in properties priced above INR 90 lakh, compared to just 27% in the pre-Covid period.
This trend underscores the shift in buyer priorities, with more households opting for homes in higher price brackets, driven by the promise of better amenities, locations, and long-term value.
Residential Plots Find Favor in the South
The survey also highlights an emerging preference for residential plots, especially in southern cities. Chennai, Bengaluru, and Hyderabad lead the trend, with 30%, 29%, and 27% of buyers, respectively, expressing interest in plots. The increasing availability of branded plot developments has further fueled demand in these markets.
Villas and row houses are also witnessing strong demand in the southern region, while apartment living continues to dominate in northern and western cities like MMR, NCR, and Pune.
Key Insights from the Survey
Real Estate Tops Investment Choices: 59% of respondents consider real estate the most reliable asset class, a 2% increase from the previous survey.
Millennials and Gen-X Plan for Future Homeownership: 66% of millennials and 42% of Gen-X respondents aim to reinvest their financial gains in property purchases.
End-User Demand Increases: 67% of buyers are purchasing homes for personal use, compared to 64% in the H2 2023 survey.
Top Priorities for Homebuyers: Buyers emphasize timely project completion, construction quality, and good ventilation in their preferred homes.
As the market evolves, developers are likely to recalibrate their strategies to align with shifting buyer preferences. Affordable housing may need a transformation in quality and design to regain buyer trust, while the growing appetite for luxury homes and rental income reflects the changing dynamics of India’s real estate landscape.