Demand for affordable housing in India drops significantly. What are the reasons?

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Demand for affordable housing in India drops
significantly. What are the reasons? In India,
where price matters a lot, especially for big
purchases like homes, there's been a surprising
dip in the demand for affordable houses.

1. Interest Rate Hike by RBI A major reason is the
   Reserve Bank of India (RBI) raising its interest
   rates by 250 points. This made home loans more
   expensive.
2. Effect on Lower-Priced Homes Homes priced under
   Rs 50 lakh were most affected because people
   buying these rely a lot on loans and are hit hard
   when interest rates go up. With rates higher,
   monthly payments (EMIs) have also increased,
   making homes less affordable for many.
3. Rising Costs Apart from interest rates, costs of
   land and construction materials have gone up.
   This makes it tough to offer homes at low prices.
4. Sales Figures A report shared that in the first
   half of 2023, only 20 of the houses sold were
   affordable ones priced below Rs 40 lakh. Last
   year, this number was 30.
5. Higher EMI BurdenDue to RBI's rate hikes, the
   monthly loan payments have gone up by around
   14.4 on average in cities.

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• Mid and Premium Housing Unaffected The higher
  interest rates haven't really impacted the sales
  of mid-range and premium houses as much. The
  demand for these is still strong.
• Expert Opinion Shishir Baijal from Knight Frank
  India appreciates RBI's efforts but warns that
  further interest rate hikes could negatively
  affect the housing market.
• In essence, rising costs and higher loan interest
  rates are making it difficult for many in India
  to buy affordable homes.
• The Impact on the Broader Housing Market
• Given this shift in demand, several implications
  and challenges emerge for the broader housing
  market in India.
• Affordable Housing Builders at Crossroads
  Developers who primarily focus on affordable
  housing projects are facing mounting pressures.
  Not only are they grappling with rising costs,
  but they're also facing reduced demand. As a
  result, many are rethinking their strategies,
  with some considering pivoting to mid-range
  housing or exploring mixed-use developments.
• Urban Migration and its Implications India has
  witnessed a significant urban migration in the
  past few years. With affordable housing becoming
  less accessible, there's a risk of increased
  informal settlements or 'slums.' This could pose
  challenges for urban planning and infrastructure
  development.
• Government's RoleThe governments mission to
  provide housing for all might face setbacks. As
  affordable housing becomes more challenging to
  secure, the authorities might need to revise
  policies, offer incentives to builders, or even
  reconsider loan subsidisation to ensure that
  everyone has a roof over their head.
• Potential for Rental Markets With purchasing
  becoming tougher, the rental market may see a
  boost. This shift might be more pronounced among
  millennials and Gen-Z, who prioritise mobility
  and flexibility. An upswing in the rental market
  could attract investors and lead to new business
  models in the Indian real estate sector.

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Overall, while the current dynamics present
challenges for the affordable housing segment,
they also open avenues for innovation,
adaptation, and a potential reshaping of India's
housing landscape. For original source visit
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