Today, we bring you an exclusive real estate report that will provide detailed insights into the decline in supply and sales of affordable housing in India. By understanding this information, you can clarify your confusion regarding investments in affordable housing and make better investment decisions.

Current Status of Affordable Housing

Let’s begin by examining the current status of affordable housing based on data:

Decline in Supply and Demand

In 2019, affordable housing projects constituted 40% of total housing sales.

This figure plummeted to just 18% in the first half of 2024.

In the NCR, there has been a staggering 72% decline in supply between 2022 and 2024.

Sales of affordable housing projects have decreased from 63,485 units in the first half of 2022 to 46,178 units in the first half of 2024, marking a 23% drop.

Shift Towards Premium Housing

Consumer preferences are shifting towards larger homes.

51% of buyers now prefer 3BHK apartments, especially in key markets like Delhi-NCR, Bengaluru, and Hyderabad.

This trend has led to increased demand for premium and luxury homes, while the supply of affordable housing has diminished.

Builders, attracted by higher profit margins, are increasingly focusing on premium and luxury housing, further fueling demand for premium segments and residential plots.

Rising Costs and Policy Challenges

The rising construction costs and high land prices have rendered affordable housing projects financially unviable.

Home loan interest rates have surged from 7% in 2021 to 8.8%, significantly impacting affordable home buyers.

The government has set a price limit of ₹45 lakh for affordable housing in metro cities, making it challenging for developers to offer these homes.

The increasing costs of raw materials and unfavorable market conditions are turning affordable housing projects into unprofitable ventures.

Location and Quality Issues

Recent surveys by Anarock-FICCI reveal that:

92% of buyers are dissatisfied with affordable housing due to location.

84% cite poor construction quality as a concern.

Additionally, 68% express dissatisfaction with the small unit sizes available.

These factors indicate that modern buyers’ expectations are not being met.

Barriers to Growth in Affordable Housing

Lack of Incentives for Private Developers

The absence of government subsidies or tax incentives has led private builders to shy away from affordable housing. Developers prefer mid-segment or premium projects, where the risks are lower, and returns are more favorable.

High Taxes and Regulatory Bottlenecks

Industry experts point out that heavy taxation and inflated ready reckoner rates in cities like Mumbai are escalating housing costs. Bureaucratic inefficiencies lead to project delays, further increasing costs and rendering affordable housing non-viable.

Demand-Supply Gap in Suburban Zones

Despite the growing need for affordable housing, developers are primarily focused on luxury segments. Areas like Sohna and Manesar near Gurugram have potential for affordable housing development, but better infrastructure and connectivity are essential.

Potential Solutions and Way Forward

Policy Reforms and Incentives

The government must redefine the parameters of affordable housing to align with current market realities. To revive this segment, it should provide subsidized land parcels.

Public-Private Partnerships

Collaborations between government and private players can facilitate the development of affordable housing projects. This approach can also incorporate social infrastructure. Developing affordable housing zones in suburban regions with reliable connectivity can significantly boost supply and demand.

Focus on Rental Housing

With 57% of real estate investors expressing interest in rental income, promoting affordable rental housing can be an effective strategy.

The decline in affordable housing in India is primarily due to rising costs, shifting buyer preferences, and weak policy support. To address these challenges, the government needs to provide targeted incentives and collaborate with private developers. Additionally, focusing on rental housing and suburban developments may lead to permanent solutions.

This exclusive report from Reality and Reports 24×7 highlights the need for reforms and necessary interventions to bridge the growing demand-supply gap in the affordable housing market. Now is the time for all stakeholders to work together to strengthen affordable housing in India.