The affordable housing market in India is witnessing consistently low supply and reduced sales figures throughout both Tier-1 and Tier-2 cities. Reports indicate how new launches have dropped by 14% and 26% in Tier-1 and Tier-2 cities in 2023 (year-on-year). This is anticipated to fall further by 28% and 27% in 2024 respectively.
At the same time, construction costs for developers have increased with property prices going up by 50-100% over the last two years in all major Indian cities. At the same time, demand for affordable housing units (Rs. 40-50 lakh) continues to be high, even though sales figures have gone down to just 19% in 2023 as compared to 38% in the pre-pandemic period.
Experts state that PMAY and other Government schemes are now working well in villages and smaller towns, although not in Tier-1 and Tier-2 cities. They also feel that many incentives given to developers and buyers have also expired, while stating how developers are curtailing new launches in the category since it has lower margins. Conversely, the premium and luxury segments are doing better and they are focusing more on the same. Several experts are of the opinion that the Government should change the qualifying standards in the sector to make more people eligible for added deductions, while also offering more tax breaks under Section 24. Scaling up the tax rebate on home loan interest from Rs. 2 lakh to Rs. 5 lakh might work as a booster dose for the segment according to several industry players.
At the same time, the Co-Founder and Chief Operating Officer, Square Yards, Kanika Gupta Shori, states that while demand is steady for affordable homes, the gap has to be bridged to ensure sustainable growth throughout the country. She estimates demand for 100 million units in the upcoming decade and the affordable housing segment to take at least 50-60% of the overall market. This will make it necessary for developers and all industry stakeholders to meet the demand gap in order to address the population growth in major cities and towns owing to rural-to-urban migration and quick urbanization throughout the country.
Square Yards is a technology-enabled, global real estate aggregator and India’s largest player for primary residential real estate. It’s subsidiary Square Capital is one of the largest marketplace for secured mortgages in India. Square Yards platform offers an integrated consumer experience & covers the full real-estate journey from search, discovery to research, transactions, home loans and post-sales service – fully integrating buyers to an extensive network of 500+ partner real estate developers, and 90+ banks & NBFCs. Square Yards is led by accomplished professionals, ex-bankers, and Ivy school alumni and is backed by the competence of more than 2500 employees in 30 cities and ten countries.