Title: Demand for affordable housing in India drops significantly. What are the reasons?
1Demand 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.
- 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. - 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. - 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. - 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. - Higher EMI BurdenDue to RBI's rate hikes, the
monthly loan payments have gone up by around
14.4 on average in cities.
2- 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.
3Overall, 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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