7 Reasons Why Affordable Homes in India Are Becoming 'Unaffordable' For The Common Man

The dream of owning a home is slipping away for many middle-class Indians as property prices soar, making affordable housing increasingly difficult to find. With the average base cost of a home now ranging from ₹1.2 crore to ₹1.4 crore, the once attainable goal of homeownership is becoming a hard chase.

1. Skyrocketing Property Prices

Property prices in India have surged to unprecedented levels, with the average home price now well beyond the reach of many middle-class families. The steep rise in costs, coupled with stagnant wages, has created a significant gap between what people can afford and what is available.

Key Figures

• Average Home Price: ₹1.2 crore to ₹1.4 crore
• Affordable Housing Sales: Dropped from 39% to 20% over five years

2. Limited Affordable Housing Options

The lack of affordable housing options from reputable developers has led to a severe mismatch in affordability. While demand for budget-friendly homes remains high, the supply is dwindling, forcing many potential buyers to look further from city centers or consider unregulated properties.

• Inventory Backlog Concerns: High-priced properties are piling up as consumers lack the financial capacity or willingness to purchase at inflated rates. Indian Property Experts warn that this could lead to a significant inventory backlog in the market.

3. The Shift Towards Premium & Luxury Housing

Real estate developers are increasingly focusing on premium and luxury segments, with new launches predominantly targeting properties above ₹1 crore. This shift is leaving the affordable housing sector stagnant, particularly in major cities where land prices and input costs continue to rise.

Rising Costs -

• Land Prices: Significant increases contributing to higher property prices
• Input Costs: Labour and material costs have also surged, driving up overall project costs.

4. The Growing Gap Between Income and Housing Costs

Over the past three years, property values have appreciated far beyond the modest increases in average salaries. This growing disparity between income levels and housing costs is making it nearly impossible for middle-class families to afford homes in urban centres.

• Income vs. Property Value: Property appreciation has outpaced salary increases, widening the affordability gap.

5. The Impact on Buyer Behavior

As property prices continue to rise, potential buyers are reassessing their acquisition strategies. Many are postponing or abandoning their plans to purchase homes, instead opting for rental options or exploring more economical locations on the outskirts of cities.

Changing Buyer Preferences - 

• Increased interest in rental properties
• Shift towards more affordable locations outside city centres

6. The Decline of Affordable Housing Projects

In Q1 of 2021, 69% of new residential launches were in the sub-₹1 crore category, but this trend has reversed in recent years. The first half of 2024 saw a dramatic increase in premium and luxury property launches, with a 169% year-on-year rise in the premium segment and a 116% increase in the luxury segment.

Shift in Market Focus - 

• Premium Segment Launches: 169% increase year-on-year
• Luxury Segment Launches: 116% increase year-on-year

7. The Long-Term Impact on the Indian Real Estate Market

Experts caution that the growing emphasis on high-end projects will exacerbate the imbalance between supply and demand, particularly in the affordable housing sector. This could lead to a slowdown in the real estate market as buyers struggle to find viable options within their budget.

• Future Outlook: Potential market slowdown if the trend towards premium housing continues Need for renewed focus on affordable housing to address the growing demand