High land prices hitting affordable housing

Main Barriers

• Chennai, Kolkata saw most launches in Sept qtr
• Customers prefer mid and high-end house properties
• Rising land prices seen as main impediment in low cost housing

The launches of affordable housing segment have reduced significantly. In 2021, the share of the affordable housing segment accounted was nearly 26% of the total supply, which dropped to 18% in Q3/2023 - Santhosh Kumar, Vice-Chairman, Anarock Group, tells Bizz Buzz

Bengaluru: At a time, realty market is on a roll, affordable housing is languishing with no signs of revival in the near-term.

Experts are of the opinion that launches in the affordable segment of housing- properties below Rs40 lakh have significantly reduced on the back of changing in consumer preferences in this interest rate-sensitive segment.

“The launches of affordable housing segment have reduced significantly. In 2021, the share of the affordable housing segment accounted was nearly 26 per cent of the total supply, which has dropped to 18 per cent in Q3 2023,” Santhosh Kumar, vice-chairman of real estate consultancy firm, Anarock Group told Bizz Buzz.

“This may be attributed to the changed preferences of the home buyers in a post-pandemic scenario. With low interest rates, the affordability continues to be at its best, moderate price rise and the presence of large and listed players have forced a shift towards the other segments, mainly mid-end and high-end. The buyers now prefer more functional homes which can accommodate a workspace for online education and work from home, as required,” he added.

On the back of rising input prices and consolidation of real estate sector, launch of affordable housing has reduced in recent years. Sources cite rising land price in cities is the main reason behind such tepid growth in the affordable housing segment. “Small realtors are sort of out of the market, who used to come up with such launches. In the pandemic and before, the sector has gone through a significant consolidation. Big realty players are less inclined to come up with mass-housing project due to low margin,” said the person.

Meanwhile, Anarock said that demand for affordable housing is unlikely to come back in the coming quarters.

“A revival in major cities is less likely in the near future as the buyers are seen to be changing preferences. Demand is robust in the mid-end and high-end segments which are witnessing increased traction. More than 50 per cent of the launches are now seen in these segments. Major cities like NCR (National Capital Region) & MMR (Mumbai Metropolitan Region) have also witnessed increased traction in the luxury segments where the properties are priced over Rs1.5 crore,” it added.

Affordable housing projects are coming up in peripheries of the cities and near to industrial clusters in many regions including Chennai and Kolkata. According to Anarock, Kolkata and Chennai being price sensitive markets continue to dominate the affordable housing market with nearly 13 per cent and 18 per cent respectively of the share of total launches in July-September period of 2023.