Affordability Crisis: Homes Below Rs 1 Crore Scarce in Mumbai Without Subsidies
Manju Yagnik, Vice Chairperson of Nahar Group, discusses the growing real estate affordability challenge in India, particularly in Mumbai, where homes below Rs 1 crore are becoming rare without government support.
Real EstateAffordabilityHousing MarketMumbaiSubsidiesReal Estate MumbaiSep 30, 2025
With residential property prices on the rise, particularly in Tier-1 cities like Mumbai, homes priced below Rs 1 crore are becoming increasingly scarce without government subsidies.
Yagnik highlights how rising construction costs, surging demand, and urbanisation are reshaping the housing market, making affordability a pressing concern for aspiring homeowners. Edited Excerpts –
Q) Thanks for taking the time out. CREDAI Natcon 2025 report highlighted that India's real estate market to touch $5–10 trillion by 2047. What are your views?
A) India’s real estate sector is on a clear growth trajectory, propelled by rapid urbanisation, infrastructure development, and rising household incomes. The projection of $5–10 trillion by 2047 highlights not just size but transformation. The market is shifting from being purely transactional to building inclusive, sustainable, and technology-driven urban ecosystems that reflect the evolving aspirations of India’s next generation of homebuyers and investors.
Q) Indian REITs offer distribution yields of 6–7%, higher than the US or Singapore. What makes Indian REITs attractive for both domestic and global investors?
A) Indian REITs have emerged as a compelling investment avenue, delivering yields that outpace many mature markets. Their appeal lies in a mix of steady income, appreciation potential, and regulatory clarity. With robust demand for Grade-A office spaces and the expansion of REITs into retail, logistics, and even data centres, investors—both domestic and global—view India as a stable, long-term play in a diversifying asset class.
Q) With housing demand resilient post-COVID and interest rates easing, how do you see residential sales trending over the next 12–18 months?
A) Residential sales are expected to stay strong. Easier financing, rising disposable incomes, and the enduring aspiration for homeownership continue to drive demand. Mid-to-premium housing will remain the most active segment as families seek larger homes with modern amenities. At the luxury end, demand from HNIs and overseas Indians is accelerating, as property is increasingly seen as both a secure investment and an emotional asset. The growing focus on sustainable, energy-efficient homes and timely project delivery will add further momentum.
Q) How affordable is affordable housing now? How much one need to buy a house in Tier 1 and Tier II cities?
A) Affordability is becoming stretched. PropEquity data shows launch prices in top cities rose 9% in FY25 to about ₹13,200 per sq. ft. — which means a modest 600 sq. ft. home now costs nearly ₹79 lakh, far above the ₹45 lakh affordability benchmark. In Mumbai, where prices average ₹34,000 per sq. ft., homes below ₹1 crore are scarce without subsidies. Tier II cities offer relatively more accessible options in the ₹30–50 lakh range, but the affordability gap is widening and calls for fresh policy interventions.
Q) Global Capability Centers (GCCs) continue to expand in India. How critical is this trend for office market demand?
A) GCCs are playing a pivotal role in shaping India’s office market. By positioning the country as a hub of global talent and innovation, they are driving strong demand for Grade-A office spaces in Bengaluru, Pune, Hyderabad, and NCR. This trend has significantly boosted leasing activity and expanded the pipeline for REITs, cementing India’s reputation as one of the fastest-growing office markets in the world.
Q) How will green building norms, ESG mandates, and sustainability-linked financing shape real estate development going forward?
A) Sustainability is no longer optional; it’s fundamental. ESG compliance, green certifications, and sustainability-linked financing are transforming how projects are conceived and executed. Homebuyers increasingly prefer energy-efficient, healthier spaces with a lower carbon footprint, while investors reward sustainable practices with stronger valuations. Developers that integrate these standards early will gain both credibility and cost advantages in the long run.
Q) Private equity inflows into Indian real estate remain strong—what asset classes are attracting the most global capital today?
A) Private equity is seeing a renewed tilt toward residential projects. Greater transparency, regulatory reforms, and developer professionalism have boosted investor confidence in this segment. Mumbai, Bengaluru, and NCR remain top investment destinations, while Pune and Hyderabad are rising quickly on the back of IT and manufacturing growth. The combination of urban demand, infrastructure upgrades, and policy stability makes India highly attractive to global capital.
Q) What are the key challenges that you face in the real estate industry?
A) Like every large sector, real estate has its share of challenges, ranging from input cost pressures to navigating approval timelines. However, recent policy measures, such as the GST rate reduction on key construction materials, are easing cost burdens for developers. With overall construction costs expected to decline by 3.5–4.5%, project viability and affordability are set to improve. This stability—particularly with no changes in GST rates for affordable or under-construction housing—creates a predictable environment for both developers and homebuyers. The industry’s focus today is less on obstacles and more on leveraging efficiency, technology, and sustainable practices to meet the evolving aspirations of India’s growing urban population.
Q) Tell us something about the profile—are more Gen Z buying the house or millennials?
A) Millennials continue to lead the housing market, backed by career stability and purchasing power. They are particularly active in mid-to-premium housing. Gen Z, meanwhile, leans toward rentals—around 27% prefer renting, according to Housing.com—valuing flexibility, prime locations, and tech-enabled living. Over time, however, this cohort will shape how homes are designed, marketed, and financed, as developers adapt to their lifestyle-driven expectations.
Frequently Asked Questions
What is the main affordability challenge in India's real estate sector?
The main affordability challenge in India's real estate sector is the rising construction costs, surging demand, and urbanisation, which are driving up property prices, especially in Tier-1 cities like Mumbai.
How are Indian REITs performing compared to other markets?
Indian REITs are performing well, offering distribution yields of 6–7%, which are higher than those in mature markets like the US or Singapore, making them attractive for both domestic and global investors.
What is the projected growth of India's real estate market by 2047?
India's real estate market is projected to touch $5–10 trillion by 2047, driven by rapid urbanisation, infrastructure development, and rising household incomes.
How are global capability centers (GCCs) impacting the office market in India?
GCCs are significantly boosting demand for Grade-A office spaces in cities like Bengaluru, Pune, Hyderabad, and NCR, expanding the pipeline for REITs and cementing India’s reputation as a fast-growing office market.
What role is sustainability playing in real estate development?
Sustainability is becoming fundamental in real estate development, with ESG compliance, green certifications, and sustainability-linked financing transforming how projects are conceived and executed. Homebuyers and investors increasingly prefer energy-efficient, healthier spaces with a lower carbon footprint.
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