5 Reasons Why the Return-to-Office Culture Could Boost Affordable Housing

Summary:

As the return-to-office culture gains momentum, it is poised to impact the residential real estate market significantly. This shift could drive demand for smaller, more affordable homes within city limits. Priorities are changing from amenities-focused living to proximity to work, affordability, and community, making urban affordable housing more appealing. However, challenges remain, and developers must navigate economic constraints and regulatory hurdles to meet the rising demand.

Ghar explores how this trend is reshaping the housing market.

1. Changing Preferences for Home Size and Location

 A recent survey indicates that nearly 80% of office-going individuals are open to working in an office-only or office-dominant hybrid model. This marks a significant shift from the late 2020 to early 2023 period when remote work was prevalent, and larger homes were preferred. With the return to office, the demand for extra rooms and larger spaces for home offices diminishes. This shift could lead to a preference for smaller, more affordable homes within city limits, as proximity to work becomes more important.

2. Decreased Need for Amenities

As people spend more time working from the office, their priorities may shift from amenities-focused living to factors like proximity to work, affordability, and community. This change in priorities can bring down the cost of ownership, as projects with fewer amenities cost less and charge lower maintenance fees. Developers may re-evaluate the inclusion of high-cost amenities in their projects to reduce overall construction expenses and focus more on affordability.

3. Economic Constraints and Market Dynamics

While the shift back to office work could drive demand for affordable housing, significant challenges remain in making urban housing truly affordable. Government initiatives and developer incentives are crucial in increasing the supply of affordable housing units. However, economic constraints, regulatory hurdles, and market dynamics may limit the extent of this. Developers face rising input costs, delays in approvals, and thin profit margins, which are major deterrents affecting the supply in the budget segment.

4. Shift in Supply Dynamics

The share of supply of affordable housing (house prices below INR 40 lakh) has reduced drastically from 26% in 2021 to 18% as of Q1 2024. This decline indicates a shrinking availability of budget-friendly homes, making it essential for developers and policymakers to address the challenges in the affordable housing segment. Regulatory reforms and fiscal incentives can play a pivotal role in encouraging developers to invest in affordable housing projects.

5. Proximity to Work and Community

As the return-to-office trend strengthens, the importance of living close to work and being part of a community becomes more pronounced. Affordable housing options within city limits or near commercial hubs offer the advantage of reduced commute times and better access to work and social amenities. This proximity can significantly enhance the quality of life for residents, making affordable housing a more attractive option.