Post the COVID-19 pandemic, the Indian housing market is increasingly showing a pronounced shift towards the luxury segment. Meanwhile, the price-sensitive affordable housing market has been gradually hurt by a number of factors, including rising interest rates, rising real estate prices, and declining supply, among others.
Earlier this week, in a virtual press conference, Knight Frank India CMD Shishir Baijal raised concerns plaguing India’s affordable housing segment. “Sale of houses priced below INR“Furthermore, it was down $5 million in the quarter, highlighting deep-rooted challenges to affordability and availability,” he said.
According to a Knight Frank report on real estate activity for the third quarter of the current calendar year, 46% of the total home sales in India’s top eight cities were concentrated in the luxury home category comprising homes priced at: Masu. INROver 1 billion.
Also read: 3Q 2024 home sales down 11% year-on-year in top 7 cities; Lead supply in Mumbai, Bangalore
On the other hand, mid ( INR5 million to 1 million) and affordable housing (below) INR50 million) segment recorded a year-on-year decline of 13% and 14%, respectively.
Of the 87,108 total homes sold in the quarter ending September 2024, 40,328 were INROver 1 billion categories. at the same time, INR500,000 to 1 billion bracket and below INRThe 50 million clubs accounted for 26,011 and 20,769 units, respectively.
multiple grounds
India’s affordable housing sector has witnessed a consistent downward trend in sales for 13 consecutive quarters, excluding Q2 2024, Knight Frank data showed.
“The problem is that most developers are moving to the more profitable, low-hanging fruit, where the returns are good, sales are good, and they hit the upper end of the market because the supply isn’t coming. , affordable housing has been hit hard,” explained Ghulam Jia, Senior Executive Director, Research, Advisory, Infrastructure and Valuation, Knight Frank India.
Also read: Affordable home launches fall 21% in April-June in seven major cities as builders focus on luxury homes
He added that while interest rates remain the biggest challenge for the affordable housing market, the lack of additional supply is another significant issue.
Others agreed. Ashwin Chadha, CEO of India Sotheby’s International Realty, said, “Rising real estate prices and interest rates are forcing developers to grapple with soaring land, material and construction costs, leading to lower profit margins.” “As a result, there is a bias toward high-end and high-end products,” he explained in detail.
However, with inflation expected to be 3.65% in August 2024, below the Reserve Bank’s acceptable range of 4-6%, industry watchers expect repo rates to be cut in the future. This could be a catalyst for the revival of the price-sensitive affordable housing segment. This segment has taken a major hit compared to the medium and mid-term following a 250 basis point increase in repo rates to 6.50% since the COVID-19 pandemic. luxury segment.
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moreover, INR2.30 crore subsidy under Pradhan Mantri Awas Yojana Urban 2.0 is expected to contribute to this sector.
“The supply-side issues will take time to resolve. We haven’t seen any new products come out in the last two to three years, so when the interest rate cut intervention starts, there won’t be enough supply in the market. , there will be problems.”
Developers say the current definition of affordable housing makes it impossible to provide such housing. The government defines affordable housing as housing that is 60 square meters or less. INR45 million in “metropolitan areas”.
