Affordable housing demand sees steep decline in India

A recent report by renowned property consultant firm Knight Frank India indicated that the sales of affordable housing in India have gone down significantly

A recent report by renowned property consultant firm Knight Frank India indicated that the sales of affordable housing in India have gone down significantly, following the Reserve Bank of India’s (RBI) aggressive 250 basis point interest rate hike, which has significantly increased the cost of housing loans.

It suggested that the category of houses priced under Rs 50 lakh has been profoundly affected after the RBI’s interest rate hike.

Sales in this segment have declined, primarily because homebuyers in this category have a higher reliance on home loans and are consequently more sensitive to interest rate hikes.

Anarock said in a report last month that rising land prices and input costs have also contributed to the decline in demand for affordable housing in India.

It said of the 2.29 lakh units sold in the top 7 Indian cities in the first half of 2023, only 20 per cent, or just over 46,000 units were affordable houses priced at less than Rs 40 lakh. In the corresponding period a year ago, sales of affordable housing accounted for 30 per cent, or 57,060 units, of the total 1.84 lakh houses sold.

The Knight Frank report suggests that over the past year, the cost of EMI has surged sharply across top cities in the country. It highlighted that EMI-to-income ratios have increased by approximately 1-2 percentage points, largely due to the central bank’s 250 basis point rate hike since last year.

The report further noted that the RBI’s aggressive rate hike to contain inflation has led to an average 14.4 per cent rise in EMI burdens across cities.