Mint Primer: Budget homes are in coma. Can they be revived?

How did affordable housing lose its sheen?

Sales of homes priced at ₹40 lakh and below have been falling over the past five years in top cities. Even as the overall property sector witnessed a recovery, budget housing continued to bleed. While home sales climbed sharply from 2019 to 2023, the share of affordable housing dropped from 38% to 19% during the period. In January-March of 2024, the sales share stayed flattish, at 20%. Not just sales, budget housing supply or new launches too shrank from 40% to 18% in the same period. The decline of affordable housing became increasingly apparent after the pandemic, as larger, premium homes gained favour.

How has luxury housing fared?

Luxury housing is usually a big gainer of real estate upcycles. Luxury homes have gained more traction in supply and sales since the pandemic with branded developers launching projects in superior locations at higher prices. As a result, the sales share of luxury homes jumped from 7% in 2019 to 25% in 2023. In January-March 2024, this was at 21%, but it is expected to pick up during the year. Of all the cities, Mumbai Metropolitan Region (MMR) has seen the most traction in this segment. The encouraging numbers have also brought back investors – domestic and non-resident Indians – after a long gap.

Is this the norm across the major cities?

Kolkata is an exception, benefiting from a steady supply and sales of budget homes. This is primarily because home prices have risen moderately compared to other cities, given that budget housing in Kolkata is the clear demand driver. In comparison, NCR has seen a trend reversal–from affordable having the lion’s share in 2019 to it slipping to the lowest in January-March 2024.

How can budget housing recover?

This will need government push and intervention. Developers have been asking for new incentives in this segment. A credit-linked subsidy scheme (CLSS) was launched in 2015, but was not renewed in the 2023 Budget. Under CLSS, a subsidy was credited upfront to the borrower’s account. A similar scheme could help borrowers now. With rising construction costs and land prices, building low-cost homes has become challenging. Land for affordable housing at subsidized prices could be an answer.

Has the government proposed anything?

A housing scheme for the urban middle-class was proposed in the Interim Budget in February. But there are no details. A new home loan interest subsidy scheme for low and middle-income groups was also announced last August. The scheme, said to be in the final stages of preparation, will replace the discontinued CLSS. It is targeted at those who live in cities but in rented homes, slums or ‘unauthorized colonies’. The government will help them build homes with relief in interest rates and loans from banks