Mint Explainer: Why sales of homes below ₹40 lakh are shrinking
₹40 lakh home. Going by analyst reports, not many developers want to build these homes anymore and buyers in large cities are not keen to buy them. While both the supply of and demand for affordable homes are shrinking, the mid-income and luxury segments are thriving.
Why is demand for budget homes slowing even as overall housing demand remains high? The sale of homes priced below ₹40 lakh in the top seven cities fell by 18% to 46,650 units in January-June 2023 from 57,060 in the corresponding period last year. The decline could be attributed to the rise in mortgage rates and the lack of adequate supply during a time when the overall residential market has thrived. The share of affordable housing in overall housing sales fell to 20% in the first six months of 2023 from 31% in the year-ago period, according to a recent report by Anarock Property Consultants.
Meanwhile, overall housing sales rose to 2,28,860 units during January-June from 1,84,000 a year ago. The Mumbai Metropolitan Region (MMR) and Pune saw the highest number of affordable homes sold, comprising 37% (17,470 units) and 21% (9,700 units) of overall sales, respectively. The National Capital Region saw roughly 8,680 homes in this category sold in H1 2023, making up 19% of total homes sold.
The real-estate market has followed a pattern over the last two decades in which developers have rushed to build and sell premium homes during boom periods and shifted to affordable homes during slumps. Before the pandemic in 2020, the seven-year-long slowdown in the residential sector was all about budget housing as builders tried to bring back buyers and revive sales. Property consultants feel it’s not just the pandemic that derailed the growth of this once buzzing
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