Rising land prices and input costs have hit the affordable housing segment. Of the 2.29 lakh units sold in the top seven Indian cities in the first half of 2023, only 20 percent, or about 46,650 apartments, were affordable houses, priced less than Rs 40 lakh, real estate consultant Anarock said on July 23.
In the year-ago period, affordable houses accounted for 30 percent, or 57,060 units, of the 1.84 lakh homes sold, Anarock research data shows.
"The total sales share of this erstwhile poster-boy segment is down to approximately 20 percent in H1 2023 against 31 percent in the corresponding period in 2022," Anarock Group chairman Anuj Puri.
The Mumbai Metropolitan Region (MMR) and neighbouring Pune saw the highest affordable housing sales, with a 37 percent (17,470 units) and a 21 percent (about 9,700 homes) share.
The National Capital Region, which includes Delhi, was third, with 8,680 affordable homes sold in H1 2023, accounting for a 19 percent share of all such units sold in the top 7 cities in H1 2023.
In Kolkata, 4,990 homes were sold in H1 2023, lower than 5,400 units in the year-ago period. There was a drop in Chennai as well, where 3,270 units were sold against 3,990 in 2022. The decline was far sharper in Bengaluru, where 1,820 units were sold in H1 2023 against 3,170 in H1 2022.
At approximately 720 units, Hyderabad sold the least number of affordable homes sold, accounting for just a 2 percent share among the top 7 cities.
“It isn't just that the pandemic derailed the growth of this once highly hyped segment - other factors posed challenges to both buyers and developers of this category," says Puri. "For instance, with land deals soaring across the country, the cost of this basic input for all real estate has spiralled in tandem.”
It was becoming increasingly unviable for developers to buy land at higher prices to build low-margin mass housing. Other input costs, too, had risen in the last few years, he said.
“Launching affordable housing projects has become singularly unattractive, especially since the monetisation potential of low-budget homes has also reduced due to shrinking demand for them,” Puri said.
The lack of sound support infrastructure in the distant suburbs and the conspicuous absence of contemporary low-cost construction techniques were additional challenges.
Falling demand, lower supply
For the last many years, affordable housing was the mainstay of the Indian housing sector but seems to have fallen off the charts, especially after easing of the Covid situation.
As for buyers, a majority put off purchases due to rising real estate prices over the last year.
The lower demand was also reflected in the new supply as developers turned their focus to mid-range, premium and luxury projects, which are in significantly higher demand.
There has been a decline in the share of new supply in the affordable category from 23 percent in H1 2022 to 18 percent in H1 2023, Anarock Research data shows.
Of about 2.12 lakh units launched in H1 2023, just 39,220 were in the affordable category. In H1 2022, 38,820 of approximately 1.71 lakh units were affordable houses.
MMR, Pune and NCR together accounted for 87 percent of the new supply in the first half of 2023.
In MMR, 23,965 such houses were in the market against 13,480 in the year-ago period – a 78 percent increase. Pune added 5,200 units, down 34 percent from 7,990 in the year-ago period.
In NCR, new affordable housing supply dropped by 40 percent – from 7,990 in H1 2022 to 4,810 in H1 2023, data shows.
In Kolkata, 1,260 units were added against 2,700 units in H1 2022. Chennai added a lot more units –2055—than the 320 in H1 2022, while Bengaluru saw an equally dramatic drop— from 5,210 in H1 2022 to only 1,245 units this year.
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