Here's Why There's Low Demand For Affordable Housing
Growth in affordable housing was depressed by high cost of land and non-use of modern low-cost construction techniques.
Affordable housing continues to languish, with supply and demand shrinking as developers reduce their focus on the segment amid rising appetites for mid-range and luxury housing, according to Anarock Property Consultant Pvt.
Out of the 2.29 lakh units sold across the top seven cities in the first half of 2023, just 20%, or 46,650 units, were affordable homes. In the same period last year, over 31%, or 57,060 units, of the 1.84 lakh units sold were in this buyer class, according to Anarock's research data.
Top Reasons
Besides the pandemic-induced dip in demand, growth in affordable housing was depressed by the high cost of land, deficient support infrastructure, and non-use of modern low-cost construction techniques, according to the report.
"It was the affordable housing target clientele that was hit hardest by the pandemic," Anarock Chairperson Anuj Puri said. "Significantly increased demand for mid-range and luxury housing post-pandemic, leading to developers amping up supply in those segments and reducing the focus on affordable housing."
The costs have also been going up as property prices have risen by anywhere between 5% and 15% in most cities, according to industry data.
Among the top seven cities, the Mumbai Metropolitan Region and Pune saw the maximum affordable housing sales, with a share of 37% and 21%, respectively. The National Capital Region comprised a 19% share of all the affordable homes sold in the top seven during the period.
Puri underscored that the cost of basic input for all real-estate spiralled in tandem with soaring land deals across the country, saying it was becoming increasingly unviable for developers to buy land at higher prices to build low-margin mass housing.
The total share of new supply in the affordable housing category across the top seven cities also declined to 18% in the first half of the calendar year from 23% in the year-ago period.
"Other input costs have also risen inexorably in the last few years," Puri 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."
