US Tariffs Threaten to Derail India's Affordable Housing Recovery
The US's 50% tariffs on Indian exports are poised to deal a significant blow to the affordable housing market, potentially choking the incomes of MSME and SME workers and leading to a decline in demand and loan defaults.
Us TariffsAffordable HousingMsmeSmeIndia Real EstateReal Estate NewsAug 11, 2025
These small and medium enterprises — employing over 260 million people and contributing 30% to GDP and 45% to exports — are among the hardest-hit by the tariff shock. Many operate in labour-intensive export sectors such as textiles, engineering goods, auto components, gems and jewellery, and food processing, leaving their workers vulnerable to income cuts or job losses.
According to ANAROCK Research & Advisory, this spells serious trouble for the affordable housing segment, defined as homes priced at ₹45 lakh or less. Once the growth engine of India’s housing market, its sales share has plunged from 38% in 2019 to just 18% (34,565 units) in H1 2025 across the top seven cities. New launches in this category have also shrunk from 40% to 12% over the same period.
“This category was already gravely hit by the COVID-19 pandemic and is still struggling to find firm ground,” says Prashant Thakur, Executive Director – Research & Advisory, ANAROCK Group. “Trump's mercenary tariffs will snuff out even the dimmest ray of hope for this segment.”
The logic is simple: reduced export earnings for MSMEs translate into lower disposable incomes for millions of potential homebuyers in the lower-income bracket. Developers catering to this market will face slower sales, while housing finance companies could see both rising loan defaults and weaker disbursements.
MSME exports had been one of India’s success stories, expanding 228% in four years from 52,849 registered exporters in FY21 to 1,73,350 in FY25. The new tariffs risk reversing these gains and, in turn, stalling one of the largest pathways to homeownership for the economically vulnerable.
“If demand derails further, developers will curtail new launches, impacting the entire affordable housing ecosystem,” Thakur warns. “It’s not just a housing story — it’s an economic stability story.”
The government’s next moves on trade negotiations, fiscal cushions, and buyer-focused incentives could decide whether affordable housing remains a viable dream for millions or becomes an early casualty of a tariff war thousands of miles away.
Frequently Asked Questions
How do US tariffs affect Indian MSMEs?
US tariffs, particularly the 50% tariffs on Indian exports, significantly impact MSMEs by reducing their export earnings, leading to potential income cuts or job losses for their workers.
What is the current state of the affordable housing market in India?
The affordable housing market, defined as homes priced at ₹45 lakh or less, has seen a significant decline. Sales share has dropped from 38% in 2019 to 18% in H1 2025, and new launches have decreased from 40% to 12% over the same period.
How do reduced export earnings affect potential homebuyers?
Reduced export earnings for MSMEs lead to lower disposable incomes for potential homebuyers in the lower-income bracket, which in turn results in slower sales for developers and increased loan defaults for housing finance companies.
What role do MSMEs play in the Indian economy?
MSMEs play a crucial role in the Indian economy, employing over 260 million people and contributing 30% to GDP and 45% to exports. They are particularly significant in labour-intensive export sectors such as textiles, engineering goods, auto components, gems and jewellery, and food processing.
What can the government do to support the affordable housing market?
The government can take several measures, including engaging in trade negotiations to reduce tariffs, providing fiscal cushions to support affected businesses, and offering buyer-focused incentives to stimulate demand and stabilize the market.
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