New Delhi: In recent years, the Indian real estate market has seen a significant shift toward premium and luxury housing, while the launch of affordable housing projects has remained minimal. The trend reflects changing buyer preferences and structural challenges in the sector.
Post-Pandemic Market Dynamics
Following the COVID-19 pandemic, buyers have returned to the real estate market, but premium and luxury segments dominate. Affluent buyers are increasingly seeking homes that combine financial investment with lifestyle preferences. In contrast, the role of the lower-middle-class segment remains limited, leading to slower growth in mid-market housing.
Decline in Affordable and Mid-Market Sales
Sales of budget and mid-market homes have slowed in recent years, while demand for premium properties remains robust. Premium buyers are generally less dependent on bank loans and less sensitive to interest rates, allowing developers to secure faster sales.
Lifestyle Preferences Drive Upper-Mid Segment Growth
According to Deepak Kapoor, promoter of Gulshan Homes and spokesperson for CREDAI (National), buyers now prefer homes that offer a better lifestyle within their budget. As a result, the upper-mid segment has emerged as the most attractive market for developers. Meanwhile, demand for luxury homes continues, though buyers are now more price-conscious and selective about new projects.
Developers Focus on Price over Volume
Real estate companies are investing heavily in making homes appear more luxurious, which helps increase profitability. Developers are currently prioritizing higher prices over sales volume. However, true market growth will depend on increased participation from first-time and mid-segment buyers.
Persistent Demand for Affordable Housing
Rising rental rates are expected to sustain demand for affordable housing, even as mid-segment buyers remain cautious about purchasing larger homes. Once buyers enter the market, Kapoor notes, they tend to make quick decisions.
Why Affordable Housing Projects Are Scarce
The scarcity of affordable projects is primarily due to high land and construction costs. While government policies define affordable housing, private developers are responsible for execution. In the past three years, construction material costs have risen by nearly 60%, further discouraging new projects. Kapoor suggests that the government could stimulate the sector by providing land at subsidized rates and revisiting outdated definitions of affordable housing to reflect current inflation levels.
The current scenario underscores the need for policy adjustments and strategic interventions to make affordable housing viable for both developers and buyers, ensuring balanced growth in India’s real estate sector.
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