India’s residential real estate market is undergoing a structural churn, and the sharp slowdown in affordable housing has emerged as one of its most telling signals. According to the latest Residential Market Report by Liases Foras, homes priced below ₹1 crore witnessed a broad-based decline in sales during CY-2025, even as the overall market posted strong value growth driven by luxury housing.
While total housing sales dipped marginally by 3% to 6,51,067 units, the more concerning trend lies beneath the surface. The most affordable segments bore the brunt of the slowdown, with homes priced between ₹10–30 lakh recording the steepest decline of 25% year-on-year. In contrast, sales of homes priced above ₹10 crore surged 73%, highlighting a widening demand divide.
Affordability Pressures Squeeze End-User Demand
Liases Foras data indicates that affordability has become the single biggest constraint for first-time and middle-income homebuyers. Stagnant income growth, elevated home loan interest rates, and sustained construction cost inflation have combined to erode purchasing power at the bottom of the market.
Unlike premium buyers, affordable housing consumers are highly EMI-sensitive. Even modest increases in interest rates or ticket sizes have materially impacted decision-making, leading many potential buyers to defer purchases rather than exit the market entirely.
Supply Skews Away from Affordable Homes
On the supply side, developers are increasingly reluctant to launch affordable housing projects. Thin margins, high regulatory compliance costs, and the absence of GST input tax credit on under-construction homes have made low-ticket projects financially unattractive.
This shift is evident in launch patterns. While overall new supply remained active in 2025, a growing share of launches was concentrated in mid-to-premium and luxury categories, particularly in metro markets. Affordable housing supply, meanwhile, has been pushed further towards city peripheries or postponed altogether.
Metro Dominance Masks Affordable Housing Stress
The top eight metro cities accounted for 78% of residential sales and 87% of sales value in 2025, but this dominance also masked the stress in mass housing. Markets such as the Mumbai Metropolitan Region and NCR continued to see steady absorption, largely driven by premium and upgrade buyers.
Tier-2 cities, often seen as the next frontier for affordable housing, recorded a 16% decline in sales volumes, despite a 9% rise in new supply. This mismatch suggests that even in smaller cities, affordability constraints are beginning to outweigh aspiration-led demand.
Construction Slowdown Adds to Delivery Risk
Another factor weighing on affordable housing is slowing construction activity. The share of constructed stock in the overall market fell from 75% in 2017 to 56% in 2025, according to Liases Foras. Execution delays and funding pressures disproportionately impact affordable projects, where buyers have limited capacity to absorb time overruns or price escalations.
As delivery risks rise, first-time buyers are increasingly gravitating towards ready or near-completion homes, further reducing absorption in new affordable launches.
Consolidation Leaves Smaller Developers Exposed
Developer consolidation has accelerated, and affordable housing has been one of its biggest casualties. Of the 11,174 active developers tracked, nearly 29% saw a year-on-year decline in performance. Small and medium developers—traditionally the backbone of affordable housing—were hit hardest, with sales value declines of 37% and 28% respectively.
Buyer preference has decisively shifted towards larger, branded developers with stronger balance sheets and execution credibility. While this improves delivery confidence, it also narrows the pipeline of affordable projects.
Outlook: A Policy-Driven Inflection Point
The Liases Foras report suggests that the slowdown in affordable housing is not demand destruction but deferred demand. Without targeted policy intervention—such as interest subvention, enhanced tax benefits for homebuyers, faster approvals, and restoration of input tax credit—the affordable segment risks prolonged stagnation.
As India’s residential market matures and consolidates, the challenge for policymakers will be to ensure that housing growth does not become skewed towards the top end alone. Reviving affordability will be critical to sustaining broad-based homeownership and inclusive urban growth.
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