(Commonwealth) _ The dream of homeownership is becoming increasingly out of reach for India’s middle class due to a decline in affordable housing. The scarcity of homes priced below Rs 50 lakh presents a significant challenge in the residential real estate market. This trend signals a shift towards premium and luxury housing segments, leaving middle-class families struggling to find suitable homes within their budgets. As the demand for high-end properties rises, the availability of affordable options continues to diminish, exacerbating the housing affordability crisis for a significant portion of the population.
Decline in Affordable Housing
Affordable homes now account for only 15% of India’s total residential real estate market, marking the lowest market share in years. This decline, from 27% in Q1 of 2022 to 15% in Q1 of 2024, reflects the diminishing accessibility of housing for middle-class families. As a result, many are struggling to find suitable homes within their budget, further exacerbating the gap between demand and supply.
Growth in Premium and Luxury Segments
While the affordable housing segment shrinks, the premium and luxury housing market is expanding. In Q1 of 2022, premium homes, priced above Rs 1.5 crore, comprised around 19% of the market across India’s top seven metros. By Q1 of 2024, this share had grown to 28%. The demand for luxury homes, particularly those priced between Rs 3 crore and Rs 5 crore, has risen from 3% of the residential market in Q1 of 2022 to 7% in Q1 of 2024. Ultra-luxury homes, priced over Rs 5 crore, have also seen an increase in sales share, rising from 2% to 4% during the same period.
Shift in Buyer Preferences
Siva Krishnan, Senior Managing Director at JLL, notes the changing market dynamics with a notable increase in the sales share of luxury homes. This trend suggests a shift in buyer preferences towards higher-end properties, emphasizing the need for developers to adapt their offerings to cater to evolving market demands. Developers must take into account the changing priorities of homebuyers, focusing on amenities, quality, and location to meet the expectations of this emerging market segment.
Regional Variations
The growth in luxury housing is particularly pronounced in the Delhi-NCR region, where approximately 44% of sales in Q1 of 2024 were in the luxury segment. This trend is driven by a high volume of launches and a strong response from buyers seeking premium properties. Meanwhile, Mumbai remains dominant in the Rs 1.5 crore to Rs 3 crore price segment due to developers strategically launching products tailored to market demand and dynamics.
Developers’ Strategic Approaches
Samantak Das, Chief Economist and Head of Research and REIS, India, at JLL, highlights the strategic approach of developers in launching products that cater to market demand. This strategic alignment with buyer preferences has led to a new growth phase in the residential market. Some branded developers are even planning to expand their portfolio and market share by entering new markets and cities.
The changing landscape of India’s residential real estate market presents both challenges and opportunities for industry stakeholders. While the decline in affordable housing creates hurdles for middle-class families, the rise in demand for premium and luxury homes signifies a shift in buyer preferences. Developers must navigate this evolving market by strategically launching products that align with the needs and expectations of buyers across different segments.
By adjusting their offerings to accommodate these market shifts, developers can capitalize on emerging trends while providing suitable options for homebuyers across the spectrum. This strategic approach will be key to maintaining growth and sustainability in India’s residential real estate market.
