Roti, kapda, but no makaan? The disappearing dream of affordable housing

India Today

5 days ago

India is running out of affordable houses. In city after city, homes once within reach of the country's vast salaried middle class—typically priced below Rs 1 crore—are quietly disappearing. And with them, the idea of ownership is slipping away for millions of Indians who still believe in that first key.For decades, a small apartment in a reasonably connected neighbourhood sat at the heart of the urban middle-class dream. Something affordable with a bit of planning. Close enough to work, stable enough to raise a family.advertisementToday, that dream is fading.
Across India's top cities, the supply of affordable and mid-income homes has dropped sharply. According to data from real estate analytics firm PropEquity, inventory in this segment fell from around 3.1 lakh units in 2022 to under 2 lakh in 2024. That's a 36% drop in just two years. In 2024 alone, the number of such homes dropped by 30% compared to 2023.
Some of the steepest declines have come in already unaffordable markets. Hyderabad has lost nearly 70% of its affordable housing supply. In Mumbai, the drop is 60%. In Delhi-NCR, supply has halved. The numbers are particularly stark in NCR, which added only 2,672 homes under Rs 1 crore in 2024 — just 6% of the city's total new supply.
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What looks like a slowdown is actually a shift in priorities. Developers are moving up market, focusing on premium launches, where margins are higher and buyers are less sensitive to price. Houses priced above Rs 1 crore have surged by nearly 48% in the same period. In Bengaluru and NCR, such launches have nearly doubled.AFFORDABILITY HITS A WALLRising costs are behind this shift. Land has become more expensive. Construction inputs, from steel to cement, remain elevated. Delays in approvals and expensive borrowing have eroded already-thin margins. For many builders, constructing homes priced between Rs 50 and Rs 90 lakh no longer makes sense.'First, the margins have become quite thin. Inflation has risen significantly and land acquisition costs have also increased,' said Sahil Verma, COO of Shray Projects, a real estate services company based in New Delhi. 'Additionally there is input inflation, which is basically a steel or cement cost. Compliance is also increased, so that also adds to the cost.''Second, the approval process generally for affordable projects is very slow,' he added. 'Government housing schemes and related initiatives often face delays in clearances.'Nowhere is the squeeze more visible than in Mumbai. According to a recent CII–Knight Frank study, the average launch price of a sub-30-square-metre unit (approximately 320 square feet) in the Mumbai Metropolitan Region rose from Rs 17 lakh in 2019 to Rs 26 lakh in 2024, marking a 55% jump.advertisementAcross the top nine cities, housing prices have risen by 9% year-on-year in FY25, according to PropEquity. In Kolkata, prices jumped 29%, followed by Thane (17%) and Bengaluru (15%). Pune crossed the Rs 10,000 per sq. ft mark for the first time. Chennai, despite being the most affordable among major metros, saw prices climb to Rs 7,989 per sq. ft. Only Mumbai and Navi Mumbai recorded a slight decline of 3%.Over a two-year period, prices have risen 18% nationally. In Bengaluru, the increase was 44%. For families in the economically weaker section (EWS), with annual incomes under Rs 3 lakh, these jumps make home loans nearly impossible. In most cases, EMIs now breach lending thresholds set by banks.What was once an entry-level home within city limits is now a compromise far beyond them. Prices have crept outward, unit sizes have shrunk, and infrastructure hasn't kept pace. Even in the distant suburbs, many middle-income buyers are now priced out.'Affordable housing today must go beyond traditional definitions of size or cost,' said G Hari Babu, National President of the National Real Estate Development Council (NAREDCO). 'In urban India, especially in a region like NCR, affordability should be linked to the buyer's income, the location's connectivity to work hubs, and the overall cost of ownership.'advertisement'Now affordability isn't just about price, it's beyond that,' said Verma. 'Nowadays it's all about what surrounds your home. If infrastructure is well developed, are there good schools, hospitals and connectivity to public vehicles?'NO WAY OUTThe impact goes well beyond personal disappointment. As affordable housing disappears, more families are being forced into long-term renting. But rents, too, have climbed sharply over the past few years.For the middle class, this creates a painful limbo: priced out of ownership and stretched thin by monthly outgo.
And the pressure is showing up in the numbers. According to Anuj Puri, Chairman of property consultant firm ANAROCK Group, urban India faces a shortfall of nearly 1 crore affordable housing units. That number could rise to 2.5 crore by 2030. A separate estimate by CII–Knight Frank places the cumulative shortage and demand at over 3 crore units by decade's end, with 95% of it in the affordable segment.advertisementEven as the overall market bounced back post-Covid, housing under Rs 40 lakh — typically classified as affordable — didn't. ANAROCK data shows this segment's share of total sales fell from 38% in 2019 to just 18% in 2024. Its share of new supply dropped from 40% to 16%.And yet, demand hasn't disappeared. It's still visible in the vanishing inventory. Between Q1 2024 and Q1 2025, unsold affordable stock dropped by 19%, from 1.4 lakh units to 1.13 lakh. Where houses are still available, end-users are buying. But they're running out of options.'Smaller developers, who have become the backbone of affordable housing, are struggling with expensive debt and limited financing options,' Puri said. 'They need direct support, not just the homebuyers.'OUT OF REACHFor many middle-class families, owning a home still matters. But it's slipping further out of reach.'Middle-class buyers remain in the market but are exercising caution, delaying their purchases in response to current market conditions,' said Pyush Lohia, Director of Lohia Worldspace. 'The increase in home loan interest rates and inflation-driven price hikes have heightened price sensitivity among potential homeowners, leading them to adopt a more strategic and intentional approach.'advertisementThere is no shortage of interest. What's missing is supply. 'Unquestionably, there is pent-up demand for affordable and mid-income housing. However, there is very little available,' Lohia added. 'Getting into this sector is the challenge. The increasing cost of land and construction is putting upward pressure on the price to the end-user, making it hard for developers to offer home prices in the affordable basket.''Land is the biggest bottleneck,' said Verma. 'In cities like Gurugram and Mumbai, land often accounts for 30 to 40% of project costs and that makes it totally impossible to deliver a unit under Rs 50–60 lakh without compromising on quality or location.'Between 2019 and 2024, the average launch price of homes under 30 square metres (approximately 322.9 square feet) rose at an 8% annual rate — nearly twice the pace of mid-sized homes. Incomes haven't kept up. Loan eligibility remains weak for low-income households. Many now find themselves permanently shut out of the housing ladder.
According to the CII–Knight Frank study from December 2024, the share of affordable housing in total launches dropped from 52% in 2020 to just 23% in 2024. And when smaller units are launched, they're often priced far out of reach for the middle class.'Developers are gradually reducing their focus on affordable housing as the overall project economics have become increasingly challenging,' said Hari Babu.ALARMING IMBALANCEAn alarming tilt toward luxury is hollowing out India's affordable housing market.'There is a growing divergence in supply, with a notable skew towards high-end and premium housing units,' said Lohia. 'If left unchecked, this trend could lead to a structural imbalance, where the supply of luxury housing far exceeds demand, while affordable and mid-income segments are neglected.''That's a lot of economic misalignment that we're seeing,' said Verma. 'The rising costs, stagnant entry-level incomes, and regulatory delays have made it all unattractive for developers.'Meanwhile, the expectations of buyers have also shifted. 'Now they don't just want walls and buildings. They want a proper housing unit where they have a lifestyle to live in, and they also don't want to be flung to far locations,' he added.It's a troubling scenario. By 2030, India will have at least 71 cities with populations over 10 lakh, including eight megacities, according to the CII–Knight Frank study. Most of the demand in these cities — nearly 2.1 crore homes — will be in the affordable segment.WHAT NEEDS TO CHANGETurning this around will require more than good intentions. Builders say the economics simply don't work any more, not unless something shifts on the policy side.'Land and construction costs are a major barrier to affordable housing today,' Hari Babu said. "Policy price caps for affordable housing haven't been revised in years, leading to a wide gap between cost and selling price. Unless there is a comprehensive effort to revise pricing norms, offer faster clearances, and reintroduce financial incentives, many developers will continue to find affordable housing unviable.''I think one is, of course, the faster approvals in single-window clearances for affordable and mid-income housing,' said Verma. 'If the government is able to provide land-related incentives, such as unlocking government land at subsidised rates for high-density housing, that is second.''And lastly, tax incentives for private developers,' he added. 'GST relief on construction or incentives tied to affordability metrics — for example, carpet area or location proximity — can benefit the segment, being impactful and commercially sustainable.'Developers are not alone in calling for course correction.'Prices of construction materials have surged, land costs are rising, and compliance burdens vary wildly,' said Shekhar G Patel, President of the Confederation of Real Estate Developers' Associations of India (CREDAI).'A unit once priced at Rs 45 lakh in 2017 now costs upwards of Rs 85 lakh in many cities. The current price cap is outdated and disconnected from ground realities,' Patel explains.Patel argues that affordability should be redefined based on size — 60 square metres (around 645 square feet) in metros, 90 square metres (970 square feet) in non-metros — to reflect real market conditions. He also calls for GST cuts, standardised stamp duties, faster approvals, and credit guarantees for buyers.'These reforms are essential to bridging the growing gap,' he said, 'and keeping affordable housing central to India's urban growth story.'For now, though, that gap remains all too real. Prices have surged, supply has thinned, and policy hasn't kept pace. Owning a home was once the beginning of a stable life. Now, for many, it's a finish line they may never reach. The dream still lives on, but the space to realise it is shrinking every day.This is part one of our two-part series on India's affordable housing crisis. In part two, we will look at how it's leaving households stuck in a limbo as they stretch budgets, delay decisions and run out of choices.- Ends