By Anuj Puri, Chairman – ANAROCK Group
Affordable housing, once the darling of India’s real estate sector, is now languishing in the shadows. Just a few years ago, it was a key focus area for developers and the government alike. Smaller unit sizes and government incentives under the ‘Housing for All’ program made this segment the cornerstone of India’s housing narrative. Yet today, affordable housing is grappling with declining supply and demand.
The numbers tell the story. In 2018 and 2019, affordable housing constituted nearly 40% of total residential supply across major cities like Pune, Kolkata, Chennai, and NCR. However, its share shrank to a mere 16% in 2024. This stark decline underscores the urgent need for a policy-driven revival, with the Union Budget 2025-26 serving as a potential turning point.
Pandemic and Changing Buyer Preferences
The COVID-19 pandemic drastically altered homebuying preferences in India. Post-pandemic, buyers began prioritizing larger, multifunctional homes with lifestyle amenities. Compact homes, once the backbone of affordable housing, lost their appeal as people sought spaces that could double as residences and workplaces.
At the same time, the segment’s primary customer base—blue-collar workers and early-career professionals—found themselves cash-strapped. For many, homeownership was replaced by the immediate need for affordable rentals, especially as businesses resumed in-office work.
Supply Shrinking Across Cities
The dwindling interest in affordable housing has forced developers to pivot to more profitable ventures. Rising input costs for land, labor, and materials have further eroded margins, making affordable housing a less attractive proposition. Consequently, developers have shifted focus to larger units with lifestyle amenities, which continue to sell well.
According to ANAROCK research, cities like Bangalore, Chennai, and Hyderabad have seen a sharp decline in affordable housing supply. In 2024, Bangalore reported no new supply in this segment, while Hyderabad and Chennai recorded just 2%. The only cities showing significant activity are Kolkata and MMR, with 31% of their upcoming supply priced under INR 40 lakh.
NCR, which once led the affordable housing segment with a 62% share in 2020, saw its share plunge to just 11% in 2024. Meanwhile, the region has shifted its focus to high-end and luxury housing, with residential sales valued at INR 90,000 crore in 2024—a 32% increase from the previous year.
The Role of PMAY
The Pradhan Mantri Awaas Yojana (PMAY – Urban) has been a cornerstone of the government’s affordable housing initiative. Since its launch in 2015, over 118.64 lakh homes have been sanctioned, with 90.22 lakh units completed as of January 2025. Central assistance of INR 2 lakh crore has been committed to date.
Despite its progress, PMAY faces challenges that need urgent attention. The lack of proper land records continues to hinder eligibility for subsidies. Additionally, the adoption of new, cost-effective construction technologies could help fast-track mass housing projects.
As the Union Budget 2025-26 approaches, it is anticipated that PMAY will receive renewed focus. Creative solutions and decisive policymaking could reinvigorate this flagship program, bringing affordable housing back into the spotlight.
Hope for a Revival?
The tapering demand for luxury housing could pave the way for a resurgence in affordable housing. Rising costs in the luxury segment may lead to a natural correction, creating opportunities for affordable housing to regain its footing.
Budget 2025-26 could play a decisive role in this revival. Substantial announcements aimed at revitalizing the affordable housing sector—be it through incentives, subsidies, or infrastructure support—could set the stage for growth.
A balanced housing market is one that caters to all segments of society, not just the affluent. Affordable housing remains crucial to addressing the needs of India’s growing population and ensuring equitable urban development.
The upcoming budget could well determine whether the affordable housing segment stages a comeback—or continues to be an afterthought in India’s real estate story.
Also Read: affordable homes in Maharashtra
