India’s affordable housing market is in crisis, with supply shrinking rapidly even as demand is expected to soar. Once accounting for more than half of all new launches in 2018, affordable homes now make up just 17% of supply. Meanwhile, a Knight Frank India and NAREDCO report estimate a shortage of 9.4 million units today, projected to widen to almost 30 million by 2030 as urbanisation accelerates.
As of June 2025, the supply-to-demand ratio for affordable housing in India’s top 8 cities - Mumbai, Delhi-NCR, Bengaluru, Hyderabad, Pune, Chennai, Kolkata, and Ahmedabad - has collapsed to 0.36, down from 1.05 in 2019, underscoring a supply deficit. New launches have fallen to barely one-third of sales, marking a reversal from previous years when affordable launches exceeded sales, buoyed by government schemes, the report said.
Industry experts warn this imbalance threatens inclusive growth. Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, "Affordable housing is not only a social priority but also an economic necessity. As India urbanises rapidly, the imbalance between supply and demand in this segment poses significant risks to inclusive growth." He added that private sector participation could be revived through "innovative financing, faster approvals, and land availability."
Why developers are walking away
Affordable housing—typically priced below ₹50–60 lakh for economically weaker and lower-income groups formed 52% of launches in 2018. But rising land costs, higher compliance burdens and thin margins have pushed developers towards mid and premium segments.
Ajay Kumar Singh, Director, Jenika Ventures, explained, "Affordable housing, which comprised over half of the total supply in 2018, has now fallen to a mere 17%. The sharp decline is mainly because of the increase in land prices, more compliance costs, and higher construction costs, making it more and more unfeasible for developers to target the sub-₹50 lakh segment."
Shorab Upadhyay, Managing Director, TRG Group, agreed: "The reason is straightforward: land cost, raw material cost, manpower cost, and regulatory approvals have gone up a long way, and it is just not possible to provide quality housing at those rates. Developers have little option but to target mid- and high-end segment projects where the economics are more sustainable."
This trend is clear in the market. Big names such as DLF, Prestige, Oberoi, and Godrej have prioritised premium and mid-segment launches, with almost no new affordable housing projects.
According to Knight Frank, only 30,806 new homes priced below ₹50 lakh were launched in major cities in the first half of 2025. This was 23% fewer than the number of homes actually sold in that category, and 31% lower than a year earlier. In Bengaluru, affordable home sales dropped 18% from the first half of 2024, and have plunged 85% since 2018.
Rising costs, rising loans
The shift is also visible in home loan data. The average loan size in top cities has jumped to ₹74 lakh, reflecting both the lack of affordable choices and the purchasing power of mid-income buyers.
Saurabh Garg, Co-founder and Chief Business Officer, NoBroker, said, "It indicates that housing has become expensive… The rising home loan ticket size doesn’t just reflect higher aspirations of today’s homebuyers, it also reflects the lack of choice in the affordable housing category."
Millennials and Gen Z, who are expected to make up 60% of new buyers by 2030, are shaping the housing market with different expectations. Developers are adapting with smaller unit sizes, flexible layouts and modern amenities.
Garg said, "Developers are increasingly launching projects that cater to younger buyers, focusing on smaller unit sizes, work-from-home-friendly layouts, and modern amenities that match aspirational lifestyles."
Singh added that younger professionals prefer compact homes with amenities, while Upadhyay pointed out that repo rate cuts and lower EMIs have encouraged them to buy earlier.
What lies ahead
The supply crunch has reached alarming levels. Gulam Zia, Senior Executive Director at Knight Frank India, said, "The sharp decline in the new supply-to-demand ratio from 1.05 in 2019 to 0.36 in 2025 demonstrates the urgent need for structural reforms. High land costs, inadequate institutional investments, and infrastructure deficits in peripheral locations continue to restrict developer participation."
NAREDCO President G Hari Babu called for bold reforms, saying, "The fact that new supply in this segment has dropped sharply while demand continues to grow is a matter of concern. Limited private investment further widens the gap. This Convention is the right platform to call for bold supply-side reforms—unlocking PSU land for housing, rationalising FSI norms, and enabling subsidised construction finance."
Garg warned of the consequences: "Without urgent intervention, India’s vision of ‘Housing for All’ could be severely compromised."
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