Affordable Housing’s Share Falls To Single Digits From Over 40 pc Before Pandemic
Chennai: Affordable housing, which once accounted for nearly half of India’s housing sales, has fallen dramatically to single digits in the last few years; This underscores growing affordability concerns in a country still facing a housing shortage of nearly two million units. To revive the segment, there is a need to bring back PMAY incentives, unlock unused government land, expedite project approvals through the single window system and provide concessional financing.
While premium and luxury homes continue to dominate new launches, the share of affordable homes in overall home sales has fallen from around 45 percent in 2019 to just 9-10 percent today, according to Prashant Thakur, Executive Director and Head of Research and Consulting, Anarock Group.
“The overall housing market has grown significantly after the pandemic, but this growth has largely bypassed affordable housing,” Thakur said, attributing the decline to a combination of rising construction costs, expensive land, withdrawal of government incentives and changing consumer preferences. he said.
Pradhan Mantri Awas Yojana (PMAY) has played a significant role in increasing both demand and supply in the affordable housing segment by offering interest subsidies to buyers and tax incentives to developers. However, the suspension of many incentives in the last two years and the sharp increase in construction costs have made affordable housing projects economically difficult.
Developers have increasingly shifted their focus to premium and luxury housing, where margins are higher and demand remains resilient. While demand for affordable homes still exists, rising land prices and rising construction costs are making such projects less financially attractive, he said.
Thakur also pointed out that income growth has been stagnant among low- and middle-income households. House prices have outpaced wage growth over the past few years, reducing affordability for first-time homebuyers. Although real estate prices are expected to stabilize in the coming years and rise only around 3-4 percent annually, affordability remains a major concern for households and small businesses working in the informal sector, many of which have yet to fully recover from the pandemic.
He argued that the government must intervene more aggressively if it hopes to achieve its “Housing for All” goal. Besides bringing back PMAY incentives, he suggested releasing unused government land for affordable housing projects, introducing a single-window clearance mechanism to shorten approval times, and providing concessional financing to developers.
Thakur also emphasized that India needs to create a stronger rental housing ecosystem and noted that homeownership should not be the sole policy goal. “A strong rental housing system can also deliver on the Housing for All target, and India lags behind many developed countries in this regard,” he said.
Real estate currently accounts for about 7 percent of India’s GDP and is the country’s second-largest employer after agriculture. Thakur expects the contribution of the overall real estate sector, which includes data centres, commercial and office segments, to rise to 13-14 per cent by 2030 as urbanization accelerates.
