Affordable homes in India dwindle to 7-year low: Report

The trend is likely to get more entrenched as a slew of Indian developers, from Mahindra Lifespace Developers Ltd. to SignatureGlobal India Ltd., ditch affordable homes in favor of premium housing projects.

India’s supply of houses costing less than 5 million rupees ($58,553) fell to their lowest since 2018, a Knight Frank report found, signaling that the trend of developers pivoting away from this segment continues.

The affordable segment saw supply of new housing units plunge to 30,806 in the six months through June, the real estate consultant said in the report last week. The share of this segment in total housing sales has dropped to 22% over this period, versus 54% in the first half of 2018.

The recent trend of the market shifting toward pricier and larger homes is due to buyers seeking a better lifestyle and better margins for developers, according to Vivek Rathi, national director, research at Knight Frank India.

The trend is likely to get more entrenched as a slew of Indian developers, from Mahindra Lifespace Developers Ltd. to SignatureGlobal India Ltd., ditch affordable homes in favor of premium housing projects.

“Rising land and construction costs, coupled with regulatory price caps have made it increasingly difficult for many developers to sustain projects in this segment,” Pradeep Aggarwal, chairman at SignatureGlobal said in a statement.

The northern state of Haryana for instance, which neighbors the capital city of New Delhi, has a ceiling of 5,000 rupees per square feet on affordable housing units in designated zones. The rule is aimed at keeping home prices low for the masses but curbs developers’ earnings.

SignatureGlobal, which has made 21 affordable housing projects in Gurgaon in Haryana in the past decade, is now focusing on homes priced above 20 million rupees.

Mahindra Lifespaces plans to exit this segment and won’t have any affordable housing projects on its books by March 2030, according to a local media report.