The dream of owning an affordable home is becoming harder to achieve for many Indian homebuyers. Nirupa Shankar, Joint MD of Brigade Enterprises, recently discussed this growing challenge during a conversation with Nikhil Kamath, co-founder of Zerodha, on his podcast “WTF is with Nikhil Kamath?”. Shankar, along with other prominent real estate veterans like Irfan Razack, Chairman and MD of Prestige Group, and Karan Veerwani, CEO of WeWork India, shared insights on why building affordable homes is becoming more difficult.
Rising Land Prices: The Biggest Obstacle
Nirupa Shankar shed light on how skyrocketing land prices have made it almost impossible to construct homes in the affordable housing segment, which is typically priced between Rs 45 lakh to Rs 60 lakh. Land prices have surged in recent years, creating a significant hurdle for developers. According to Shankar, the rising costs have caused a dramatic decline in affordable housing availability.
Citing a Knight Frank India report from October, Shankar mentioned that the construction of affordable homes has dropped by 50 percent in recent years. This has impacted a large section of the population who are in need of homes in this price range.
Changing Definition of Affordable Housing
The definition of affordable housing has also shifted. According to Knight Frank India, nearly 46 percent of housing sales now come from units priced at Rs 1 crore or more, indicating that more buyers are opting for higher-priced homes. Homes priced between Rs 50 lakh to Rs 1 crore account for 30 percent of sales, while houses below Rs 50 lakh make up only 24 percent of the market.
This changing definition shows that affordable homes are no longer the central focus for many developers. Shankar mentioned that for builders, luxury housing starts at Rs 3 crore, with homes priced between Rs 1.3 to Rs 3 crore classified as upper mid-premium.
Affordable Housing Sales on the Decline
The demand for affordable housing is not only affected by rising land costs but also by other market factors. Knight Frank India‘s report showed a 14 percent decline in the sales of homes priced under Rs 50 lakh between July and September of 2024 compared to the same period in 2023.
The sale of units in this segment dropped to 20,769 in the third quarter of 2024 from 23,026 units in 2023. Key reasons include the increase in home prices, higher home loan interest rates, and a general decrease in demand from homebuyers in this segment. The limited availability of affordable homes has also pushed potential buyers out of the market.
Fewer Affordable Homes in the Market
One of the critical issues is the lack of new launches in the affordable housing segment. Developers have shifted focus to mid-range and luxury homes due to higher margins, leaving the affordable housing segment undersupplied. As a result, there are fewer homes priced below Rs 50 lakh available, leading to a further reduction in sales.
The combination of rising costs, lower demand, and fewer new projects is making it difficult for many Indians to buy homes within their budget, effectively turning the dream of homeownership into a distant goal for a significant portion of the population.
