Why is the Demand for Affordable Housing Down - Anarock Report and Budget 2023-24

Why is the Demand for Affordable Housing Down - Anarock Report and Budget 2023-24

SURFACES REPORTER #newscatchup - Mumbai, 30 January 2023: India's residential real estate sector looks hopefully to Budget 2023-24 to boost the country's flagging affordable housing segment. The segment had revived after the government began to roll out incentives from 2015 and became ‘respectable’ with both buyers and developers. However, the pandemic seriously impacted the affordable housing segment, with both demand and supply shrinking to their lowest levels.

  • ANAROCK's 2018 Consumer Sentiment Survey found 39% property seekers preferring affordable homes (priced <INR 40 lakh); this declined by 13% in 2022
  • Shrinking demand since 2018 has impacted new affordable housing supply in the top 7 cities; developers are focused on mid & premium housing priced b/w INR 40 lakh to INR 1.5 Cr
  • In 2018, supply share of affordable housing was highest at 40% of over 1.95 lakh units launched that year; in 2022, this dipped to just 20% of approx. 3.58 lakh launched units
  • Despite reduced supply, unsold affordable stock in the top 7 cities is significant - of total 6.30 lakh unsold units in top 7 cities as of 2022-end, affordable housing comprises 27%
  • To boost affordable housing demand, Budget 2023-24 must revise price bandwidths for affordable housing & align with market dynamics of cities; more buyers must avail benefits of lower (1%) GST without ITC & other govt. subsidies
  • Govt. must also push affordable rental housing scheme launched post pandemic.


ANAROCK's Consumer Sentiment Survey finds that in 2022, demand for affordable housing has sunk precariously. In 2018, approx. 39% property seekers in the top 7 Indian cities were keen on affordable homes priced within INR 40 lakh. This demand shrunk to its lowest levels in 2022, with just 26% property seekers looking to buy in this budget segment.

There is significant unsold affordable stock across the top 7 cities. Of approx. 6.30 lakh unsold units in the top 7 cities by 2022-end, affordable housing accounted for over 27%. Demand has remained low for this segment since the pandemic, and the government needs to revitalise it on a priority basis. The upcoming budget presents an opportunity to do so.


What Can the Budget Do?

“One possible way the Budget can intervene is by revising the price bandwidths for homes that qualify as affordable housing, as per the specific market dynamics of different cities,” says Anuj Puri, Chairman – ANAROCK Group. “The size of units that qualify for various affordable housing benefits is currently 60 sq. m. on carpet area. While this is appropriate, the uniform price band of up to INR 45 lakh for affordable housing is not aligned with the market realities of most major cities.”

“One possible way the Budget can intervene is by revising the price bandwidths for homes that qualify as affordable housing, as per the specific market dynamics of different cities,” 

Anuj Puri, Chairman – ANAROCK Group

INR 45 lakh or below is far too low in a city like Mumbai, where it should be increased to INR 85 lakh or more. In other major cities, the price band should be increased to INR 60-65 lakh. This would result in more homes qualifying as affordable housing, enabling many more homebuyers to avail benefits such as reduced GST at 1% without ITC, and other government subsidies.

“More tax sops for housing end-users and investors for affordable housing would also boost demand,” says Puri. “The current tax rebate of INR 2 lakh on housing loan interest under Section 24 of the Income Tax Act must be increased to at least INR 5 lakh. This will add momentum to housing demand, particularly in the cost-sensitive affordable segment.”

“Budget 2023-24 can also push the government’s affordable rental housing scheme that was launched post the pandemic. Covid-19 put serious constraints on the lower income groups, causing many to step away from homebuying aspirations altogether. To add momentum to its Housing for All vision, the government can use the Budget to incentivize ARHCs (Affordable Rental Housing Complexes) which can fill the gap until homebuying capacity in the lower income groups improves.”

To invite private participation in this initiative, the government had rolled out incentives such as use permission, 50% additional FAR/FSI, concessional loan at priority sector lending rate, and tax reliefs at par with affordable housing with a view to develop ARHCs on developer-owned vacant land for 25 years. However, the low yields of affordable rental housing were a major deterrent. Despite funding for such projects to be provided at concessional rates, most players find it unviable to develop ARHCs on already scarce land procured at steep prices in the major cities. The Budget is an opportunity to introduce more deal sweetening measures to finally get Affordable Rental Housing Complexes going in the country.


Affordable Housing - Declining Supply Share

One clear indicator of affordable housing’s declining fortunes is the significantly reduced supply. With demand for budget housing shrinking over the last few years, developers began launching more projects in the mid and premium segments instead. This caused the supply share of affordable housing to decline steadily and reach its lowest level in 2022.

As per ANAROCK Research, out of total 3.58 lakh units launched in the top 7 cities in 2022, affordable housing accounted for just 20%. If we consider that in 2018, this segment had a 40% share of approx. 1.95 lakh units launched that year, the plunge is stark.

The government's Housing for All scheme is squarely focused on affordable housing. It is imperative that Budget 2023-24 announces strong measures to revive this ailing segment.



[Surfaces Reporter (SR) NEWS Catchups are selected articles picked up by SR from daily releases. We do not take responsibility for the authenticity of factual correction of those which is picked as per daily updates in Surfaces Reporter News Catchup. You can share Press Releases and updates to press@surfacesreporter.com.


Post Your Comment

"Content that powers your Business. News that keeps you informed."

Surfaces Reporter is one of India's leading media in Print & Digital Telecast for News on Interiors & Architecture Projects, Products, Building Materials, and the Business of Design! Since 2011, it serves as a referral for designers & architects to know about inspiring projects and source new products. If you have a Product or Project worth publishing in Surfaces Reporter, please email us hello@surfacesreporter.com or you can also submit your project online.

Like Surfaces Reporter on Facebook | Follow us on Twitter and Instagram | Subscribe to our magazine | Sign Up for the FREE Surfaces Reporter Magazine Newsletter

BDA Aims for 2,600 Units by March in Chandrasekharpur Affordable Housing Project

The project targets four slums—Narayani Bachelor Barrack Basti, Telugu Basti, Kimviria Basti and Srikrushna Basti—with 97 dwelling units already assigned to beneficiaries from these areas.

Read more

Budget 2023-24: Reactions from Corporate and Real Estate Experts

Post-budget reactions from real estate and building industry veterans on the major Budget announcements.

Read more

A Budgeted Home Designed Around An Existed Tree In Kerala | A Line Studio

Located in Ambalathara, a village in Kasaragod district in the state of Kerala, this home is designed for an artist by Ar. Anand P & Ar. Sachin Raj of A Line Studio within a limited budget of 25 lakhs in a 10-cent land.

Read more

Earthy Tones, Monochrome Palette, Sober Colour Theme and Subtle Textures Define This Budgeted Family Home in Noida | J+AM Storey

A family of four commissioned Amit Bhatia and Jaanshi Bhatia of J+AM Storey to remodel their Noida home on a limited budget.

Read more

This is alt