Affordable Housing in India: A Closer Reality Despite Challenges

An issue that needs to be addressed is the lack of adequate supply being created in specific markets due to high land acquisition costs, lengthy approval processes, and construction costs.

Unsold stock in the affordable housing segment shrank by 19 per cent to about 113,000 units by the end of the first quarter of calendar year 2025. Anuj Puri, chairman of Anarock Group, says there is strong demand but “developers have largely avoided this segment, resulting in minimal new launches in recent years”. Consequently, people are purchasing from the existing inventory. Rising costs of land acquisition, construction, and approval have also pushed builders to prioritize premium projects, “as affordable housing offers very thin margins. Furthermore, property prices have soared across cities, exacerbating the affordability crisis.”

But things could change after the government's recent initiatives to boost the affordable housing sector. These initiatives include financial incentives, streamlined approval processes, and subsidized land costs. The government's Pradhan Mantri Awas Yojana (PMAY) has been a significant driver, aiming to provide affordable housing to all by 2022.

The real estate industry has seen a mixed performance over the past year. While housing supply has slowed down, record investments have flowed into the sector, indicating a strong interest from investors. However, the gap between supply and demand in the affordable housing segment remains a critical challenge. Developers are hesitant to enter this market due to the thin profit margins and high costs involved.

Despite these challenges, there are signs of improvement. The government's focus on affordable housing, coupled with the growing demand, is expected to drive more developers into this segment. Financial institutions are also showing more interest in funding affordable housing projects, which could further boost the sector.

Industry experts believe that the demand for affordable housing will stabilize as sales are likely to be lower compared to 2023. However, the long-term outlook remains positive, with the government's continued support and the increasing need for affordable homes.

In conclusion, while the affordable housing segment in India faces significant challenges, the government's initiatives and growing demand are making it a more attractive option for developers. As the industry continues to evolve, the dream of affordable housing for millions of Indians is getting closer to reality.