Gulam Zia, Senior Executive Director at Knight Frank India, has called for a revision in the definition of affordable housing to better align with current market realities. In a recent interview, Zia, who also leads the CII Task Group on Affordable Housing, discussed the growing demand for affordable housing in India, which is expected to reach ₹67 trillion by 2030, with a demand for 31.2 million units. He highlighted the significant mismatch between how policymakers define affordable housing and how it is perceived in the market, which is creating barriers for many potential homebuyers.
Zia noted that between 2019 and 2024, the prices of residential units in the Mumbai Metropolitan Region (MMR) below 30 sqm (EWS category) increased at a compounded annual growth rate (CAGR) of 8%, significantly outpacing the price growth in the mid-income segment (4.4% CAGR for units between 60 and 160 sqm). He pointed out that for an average unit priced at ₹26 lakh in MMR, an economically weaker section (EWS) family with an annual income under ₹3 lakh would struggle to secure a home loan due to the high EMI requirement, which exceeds the fixed obligation to income ratio (FOIR) limit set by banks.
To address this, Zia suggested that the policy should be revised to reflect the current price dynamics. He emphasized that the ₹45 lakh cap on affordable housing for metro cities, which was set by policymakers in 2019, should now be closer to ₹60 lakh, accounting for inflation and rising costs. He argued that this adjustment is necessary to make affordable housing truly accessible to the target population. In response to the lack of supply in the affordable housing segment, Zia explained that developers are more inclined to focus on the premium and luxury segments, where demand is strong, and profits are more easily assured. He noted that premium segments are more lucrative for developers, as they can pre-sell homes quickly, whereas affordable housing requires more marketing efforts and has uncertain sales outcomes.
When discussing the rapid rise in property prices, Zia expressed concerns about a potential “bubble” forming in the upper end of the market. He observed that while affordable housing prices have remained relatively stable, the luxury segment has seen steep price hikes due to strong demand and speculative buying, particularly in properties priced ₹80 lakh and above. He warned that this could lead to a slowdown in sales velocity in select locations, signaling the onset of a real estate bubble. Zia also highlighted the impact of rising interest rates on affordable housing, which has made home loans more expensive, particularly for lower-income buyers. With interest rates increasing from 6.5% to around 9%, the affordability of homes for the economically weaker sections has been significantly impacted, further exacerbating the challenges faced by buyers in this segment.
