New Delhi: India’s real estate market has witnessing a significant expansion, with some suggesting it might be approaching bubble territory. Interestingly, affordable housing—properties priced under Rs 60 lakh are not part of this boom. The challenge isn’t demand, since the desire for affordable homes remains high. The problem stems from a shortage in the supply of homes.
Affordable housing out of reach?
According to a report by PropEquity, the new supply of affordable homes declined by 38 per cent across 8 major cities from January to March 2024. Only about 33,000 units were launched Q1 this year, compared to almost 54,000 units during the same period a year ago. This decline in affordable housing is most notable in India’s 8 major cities such as:
Delhi-NCR
Mumbai Metropolitan Region
Bengaluru
Hyderabad
Chennai
Kolkata
Pune
Ahmedabad
Last year, fewer than 180,000 affordable housing units were launched, marking a significant 20 per cent drop from nearly 225,000 units in 2022. This downward trend in affordable home supply has been ongoing for some time and is expected to continue throughout 2024.
Luxury housing on the rise
In a stark contrast, the luxury housing market is booming and data from Anarock suggests that the share of luxury homes priced above Rs 1.5 crore has tripled over the past 5 years. Luxury homes accounted for about 11 per cent of new home supply pre-COVID-19. This figure has more than doubled this year to 25 per cent.
Factors driving the decline in affordable housing
Rising real estate prices, surging construction costs and elevated interets rates are making homes increasingly unaffordable. The overall construction cost in India is expected to rise by as much as 6 per cent this year, according to the JLL Construction Cost Guide. High interest rates are making house acquisition more expensive. The high cost of capital for builders is passed down to customers, who then have to take EMIs at higher interest rates to buy these already inflated homes
For developers, the mid-range to premium and luxury segments are where the profits are. The pent-up demand during COVID-19 is still getting satiated, so demand for that segment is higher and builders are able to charge a markup as there are enough buyers willing to splurge.
The challenges faced by the affordable housing segment in India are pressing and require urgent attention. The shrinking share of affordable housing in overall sales, combined with the rising interest rates on home loans, necessitates focused interventions to make homeownership more accessible for the common man.
While India’s real estate boom has resulted in windfall for developers and realtors from the sale of mid-range to premium homes, the affordable housing segment seems to have been overlooked by the industry. Affordable housing launched has witnessed a decline for 2 straight years now. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
