India’s real estate market has changed significantly after the Covid-19 pandemic. While luxury homes are selling faster than ever, affordable housing is facing serious challenges. For middle-class and first-time homebuyers, owning a home under ₹50 lakh is becoming increasingly difficult.
So, why is this happening—and what does the future hold?
Luxury Homes Are Dominating Sales
Recent market data shows a clear shift toward premium and luxury properties. Nearly half of all homes sold in India’s top cities are now priced at ₹1 crore or more. Buyers with higher purchasing power are driving demand, while developers are focusing on projects that offer better returns.
On the other hand, both affordable and mid-income housing segments have seen a year-on-year drop in sales, highlighting growing affordability issues.
Why Affordable Housing Is Struggling
There isn’t just one reason behind the slowdown. Several factors are affecting the affordable housing segment at the same time:
- Rising property prices due to higher land and construction costs
- High home loan interest rates, making EMIs expensive
- Limited new project launches, as developers prefer premium housing
- Lower profit margins in affordable projects
Because of these challenges, affordable housing sales have been declining for over three years, with very few signs of immediate recovery.
Can Interest Rate Cuts Bring Relief?
There is some hope ahead. Inflation has cooled down, which increases the possibility of repo rate cuts by the Reserve Bank of India. Lower interest rates could make home loans cheaper and improve affordability for buyers in the budget segment.
In addition, the government’s Pradhan Mantri Awas Yojana (Urban) 2.0, with a subsidy allocation of ₹2.30 lakh crore, aims to support affordable housing demand.
However, experts caution that even if demand improves, supply may remain a concern, as very few affordable projects have been launched in recent years.
What This Means for Homebuyers
For buyers, this could mean fewer affordable options in the short term, especially in metro cities. Prices may remain firm due to low supply, even if interest rates fall. Buyers looking for budget homes may need to act quickly when new projects are launched.
Frequently Asked Questions (FAQs)
1. Why is affordable housing declining in India?
Affordable housing is declining due to high interest rates, rising construction costs, increasing land prices, and reduced supply as developers focus on luxury projects with higher returns.
2. What is considered affordable housing in India?
In metro cities, affordable housing is defined as homes up to 60 sq. metres with a price of ₹45 lakh or less, as per government guidelines.
3. Why are developers focusing more on luxury housing?
Luxury homes offer better profit margins, faster sales, and higher returns compared to affordable housing, especially during times of rising costs.
4. Will home loan interest rates come down?
With inflation under control, there is a strong possibility of repo rate cuts in the coming months, which may reduce home loan interest rates.
5. Can government schemes revive affordable housing?
Yes, schemes like PMAY Urban 2.0 can boost demand through subsidies, but long-term recovery also depends on increasing supply from developers.
6. Is it a good time to buy an affordable home?
If you find a suitable project with good connectivity and pricing, it may be a good opportunity—especially before prices rise due to limited supply.
India’s real estate market has changed significantly after the Covid-19 pandemic. While luxury homes are selling faster than ever, affordable housing is facing serious challenges. For middle-class and first-time homebuyers, owning a home under ₹50 lakh is becoming increasingly difficult.
So, why is this happening—and what does the future hold?
Luxury Homes Are Dominating Sales
Recent market data shows a clear shift toward premium and luxury properties. Nearly half of all homes sold in India’s top cities are now priced at ₹1 crore or more. Buyers with higher purchasing power are driving demand, while developers are focusing on projects that offer better returns.
On the other hand, both affordable and mid-income housing segments have seen a year-on-year drop in sales, highlighting growing affordability issues.
Why Affordable Housing Is Struggling
There isn’t just one reason behind the slowdown. Several factors are affecting the affordable housing segment at the same time:
Because of these challenges, affordable housing sales have been declining for over three years, with very few signs of immediate recovery.
Can Interest Rate Cuts Bring Relief?
There is some hope ahead. Inflation has cooled down, which increases the possibility of repo rate cuts by the Reserve Bank of India. Lower interest rates could make home loans cheaper and improve affordability for buyers in the budget segment.
In addition, the government’s Pradhan Mantri Awas Yojana (Urban) 2.0, with a subsidy allocation of ₹2.30 lakh crore, aims to support affordable housing demand.
However, experts caution that even if demand improves, supply may remain a concern, as very few affordable projects have been launched in recent years.
What This Means for Homebuyers
For buyers, this could mean fewer affordable options in the short term, especially in metro cities. Prices may remain firm due to low supply, even if interest rates fall. Buyers looking for budget homes may need to act quickly when new projects are launched.
Frequently Asked Questions (FAQs)
1. Why is affordable housing declining in India?
Affordable housing is declining due to high interest rates, rising construction costs, increasing land prices, and reduced supply as developers focus on luxury projects with higher returns.
2. What is considered affordable housing in India?
In metro cities, affordable housing is defined as homes up to 60 sq. metres with a price of ₹45 lakh or less, as per government guidelines.
3. Why are developers focusing more on luxury housing?
Luxury homes offer better profit margins, faster sales, and higher returns compared to affordable housing, especially during times of rising costs.
4. Will home loan interest rates come down?
With inflation under control, there is a strong possibility of repo rate cuts in the coming months, which may reduce home loan interest rates.
5. Can government schemes revive affordable housing?
Yes, schemes like PMAY Urban 2.0 can boost demand through subsidies, but long-term recovery also depends on increasing supply from developers.
6. Is it a good time to buy an affordable home?
If you find a suitable project with good connectivity and pricing, it may be a good opportunity—especially before prices rise due to limited supply.