Affordable housing a critical gap in India’s real estate boom

The Indian property market has been thriving in recent years, with record-high take-up of shopping center and warehouse space, office leasing volumes reaching their second-highest level, and new flat sales in the eight largest cities delivering strong performance. However, the boom in the real estate sector masks a critical issue - a severe shortage of affordable housing.

In 2018, 52% of launches in India's largest cities were flats priced below 5 million rupees, dropping to just 17% by the end of the previous year. This supply crunch in the low-to-mid-end of the market is becoming increasingly acute as India grapples with a demographic dividend and concerns about AI-induced disruption to its IT services and outsourcing industry.

The demand for accessible, quality homes is rising rapidly due to accelerated urbanisation, with 71 cities expected to have populations exceeding one million by 2030. The shortage of affordable housing is attributed to factors such as high costs and limited availability of urban land, fragmented land holdings, regulatory failures, and a lack of institutional investment in the sector.

As the premium and luxury segments of the market continue to thrive, developers are increasingly abandoning the affordable housing segment. The government should provide more incentives for developers to build affordable homes to address the supply crunch and meet the growing demand for quality housing in India.