From 2019 and 2022, the affordable housing market (units priced under INR 40 lakh) showed a decline in its overall sales share. According to Homebazaar.com, roughly 38% of the nearly 2,61,400 units sold overall in the top 7 cities in 2019 were in the budget class.
However, in 2022, about 26% of the 3,64,880 units that were sold in total throughout the top 7 towns fell into the inexpensive group. Hence, the share of the overall sales has also decreased.
Although there is a strong theoretical demand for inexpensive housing, there are few options available. In contrast to consumers in the premium and luxury categories, the target group has been adversely affected by the pandemic, and many are currently delaying buying selections in favour of renting.
However, the profit margins for builders of inexpensive housing were already quite slim. It has become even harder for them to introduce affordable homes due to rising inflationary trends in basic component prices (cement, steel, manpower, etc.), as raising prices in this extremely cost-sensitive market segment would be counterproductive.
The mid-and premium-priced sectors, which range in price from INR 40 lakh to INR 1.5 crore, are where the current demand is most skewed. These two market sectors have fared very well since the pandemic, and the younger generation is the main demand generator. These millennials also include modern, tech-savvy individuals employed in start-up companies or industries like IT/ITes.
Developers have adjusted their strategies to accommodate demand and have increased the number of developments in the mid-premium categories as demand for inexpensive housing has decreased over the past several years. In the last five years, the supply ratio of affordable homes has been falling, and it will be at its lowest in 2022.
Roughly 27% of the more than 6.30 lakh units that will be on the market across the top seven cities by the end of 2022 are in the affordable category with prices under INR 40 lakh. After its implementation in the middle of 2015, PMAY (Urban) has made progress.
As of March 2023, the government had already approved 122.69 lakh dwellings, according to the Ministry of Housing & Urban Affairs (MoHUA). While development has begun on approximately 109.23 lakh units, approximately 72.56 lakh dwellings have been finished. Around INR 2.03 lakh cr of central support has already been promised in terms of finances. It will take a holistic approach with many moving elements that all work together to achieve one common objective, which is to turn around the sagging prospects of India’s affordable housing market.
