The demand for affordable homes in India, especially those priced under ₹50 lakh, is declining steadily. Several factors are contributing to this shift, and it’s becoming a challenge for developers to attract buyers in this segment. Issues like poor location, low-quality construction, and small house sizes are making buyers hesitant to invest in affordable housing.
Here’s a closer look at why homebuyers in the affordable segment are getting discouraged and what recent trends are shaping the real estate market.
Key Factors Affecting Buyer Sentiment in the Affordable Segment
According to the latest ANAROCK-FICCI Homebuyer Sentiment Survey report for the first half of 2024, more than 50% of potential homebuyers expressed dissatisfaction with the available options in the affordable housing segment. The reasons behind this dissatisfaction are mainly centered on three key issues:
1. Poor Project Location
A significant 92% of respondents cited the poor location of affordable housing projects as the top reason for not making a purchase. Many of these projects are situated far from essential amenities like schools, hospitals, and public transportation, making them less desirable for buyers.
2. Low Construction Quality and Design
Another major concern for homebuyers is the quality of construction and design. Around 84% of buyers felt that the construction quality in affordable housing was below standard. In addition to poor construction, many homes have subpar interior designs, making them unattractive for long-term investment or living.
3. Small Unit Sizes
Size is a crucial factor for buyers in the affordable segment, and 68% of respondents felt that the units were simply too small. These compact homes offer limited living space, making them impractical for growing families or those who prefer more room for comfort.
Declining Supply of Affordable Homes
In recent years, the supply of affordable homes has decreased significantly. ANAROCK data shows that the share of affordable housing in total real estate supply has dropped from 26% in 2021 to just 17% by September 2024. Before the COVID-19 pandemic, 40% of new projects in 2019 were categorized as affordable housing, but this number has steadily declined since then. Developers are focusing on larger, more premium housing options due to the changing demand in the market.
Shifting Demand Toward Bigger Homes
With the declining interest in affordable housing, there’s a noticeable trend toward larger homes, particularly 2BHK and 3BHK units. According to the survey:
- 51% of buyers expressed a preference for 3BHK homes, especially in cities like Chennai, Hyderabad, Delhi-NCR, and Bengaluru.
- In Kolkata, Mumbai, and Pune, 40% of buyers preferred 2BHK homes.
- Additionally, 45% of buyers are now looking for homes priced above ₹90 lakh, reflecting a growing interest in more premium housing options.
Real Estate Still a Preferred Investment Choice
Despite the challenges in the affordable segment, real estate continues to be a popular investment option. 59% of survey respondents listed real estate as their top choice for investment, a slight increase compared to previous surveys. This is largely due to the rental income potential, with 57% of investors citing good rental returns as their main reason for investing in property.
While the stock market is becoming more appealing, with increasing numbers of people opening demat accounts, only 31% of respondents showed a preference for investing in stocks. Gold investment is also on a decline, with just 5% of people favoring it as an investment option.
Millennials and Gen-X Buyers Eye Real Estate
There is also a growing interest in real estate among millennials and Gen-X buyers:
- 66% of millennials and 42% of Gen-X respondents stated that they plan to invest in property in the future.
- Additionally, more than 67% of buyers are purchasing homes for personal use, up from 64% in previous surveys.
Changing Preferences: New Launches vs Ready-to-Move Projects
A significant shift has been observed in buyer preferences when it comes to new launches versus ready-to-move homes. The survey found that while ready-to-move homes were more popular in 2020, new launches have gained traction in 2024. This change is primarily due to buyers preferring projects by large, listed developers who are known for delivering homes on time and meeting quality expectations.
In 2020, the ratio of ready-to-move homes to new launches was 46:18. However, in the first half of 2024, 25 out of 45 respondents showed a preference for newly launched projects, indicating a growing trust in reputed developers.
