Urban Wealth Climbs as Middle-Class Shrinks - A Transformative Shift Shaping Indian Real Estate and Economy

Urban India's socio-economic landscape is undergoing a dramatic shift. According to Kantar’s ‘India at Crossroads’ report, the number of affluent households in cities has jumped by 86% from 2019 to 2024. This growth contrasts sharply with the decline of 25% in lower and lower middle-class households during the same period. >

Affluent Households Surge by 86% in 5 Years

Middle-Class Erosion Alters Urban Demographics

The once-dominant urban middle class—historically the backbone of the consumer market—now forms only 35% of urban households, down from 52% five years ago. Meanwhile, affluent households (SEC A) have risen significantly, comprising 39% of urban households compared to 24% in 2019. This marks a substantial transformation in the urban economic pyramid.

Stagnating Real Incomes and Inflationary Pressures

Real income growth, when adjusted for inflation, has stagnated or declined across all income brackets in 2024. This has fueled urban consumer stress, leading to reduced consumption of mass-market products. Consequently, FMCG companies like Hindustan Unilever and Britannia reported weak urban sales even as rural markets rebounded.

Premiumisation Drives Urban Spending

Urban consumption trends are increasingly skewed toward premium products, reflecting the growing purchasing power of affluent households. However, this "premiumisation" offers little solace for mass-market brands, which face weak demand for essential, low-cost goods in cities.

Rural Demand Outpaces Urban Growth

Rural India has shown signs of recovery, with consumption bolstered by good monsoons and diverse income sources. FMCG sales in villages outpaced urban growth for the first time in three years during early 2024, driven by price cuts and a lower base effect.

Expert Insights: How This Shift Impacts Indian Real Estate

Demand for Luxury Housing on the Rise:

The affluent class's growth directly correlates with increased demand for premium and luxury housing, particularly in metropolitan areas like Mumbai, Delhi, and Bangalore.

Middle-Class Housing Decline:

Developers focusing on affordable and mid-segment housing might face stagnation due to the shrinking middle class, necessitating diversification into higher-end projects.

Urban Rental Market Stress:

Rising housing costs and low-income growth among the urban working class are likely to strain rental affordability, pushing some demand to suburban or peri-urban areas.

Rural Real Estate Potential:

The revival of rural consumption presents an opportunity for developers to explore smaller towns and Tier-2 and Tier-3 cities for affordable housing and second-home markets.

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Shift in Real Estate Marketing:

With premiumisation dominating urban spending, marketing strategies must cater to the affluent buyer with value-added offerings such as gated communities, lifestyle amenities, and sustainability-focused developments.

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