Realty Sector Pushes for Affordable Housing Reforms
The Indian real estate sector is looking to the upcoming Union Budget for FY26, scheduled to be presented on February 1, 2025, for much-needed reforms to revive the ailing affordable housing market. After the setback in the previous budget when the government removed the indexation benefits on housing loans, industry players are hoping for substantial changes to reignite market sentiment. They are seeking a rise in the tax exemption limit on housing loans, an overhaul of affordable housing criteria, and the reinstatement of the Credit-Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana (PMAY). These measures, they argue, are crucial to addressing the slowdown in the real estate market and making housing more accessible for the masses.
Affordable Housing Struggles Amid Declining Demand
Affordable housing, once seen as the growth engine of the real estate sector, has been struggling to meet demand post-pandemic. Homes priced under ₹40 lakh, which were once in high demand, have seen their sales share drop significantly. According to data, the share of affordable housing sales in India fell to 18% in 2024, down from over 38% in 2019. Anuj Puri, Chairman of ANAROCK Group, highlights that the primary reason for this decline is the reduced focus on affordable housing and the lack of necessary reforms. “Affordable housing requires dedicated attention and targeted benefits, which have been lacking over the past two years,” said Puri, emphasising that tax breaks alone will not solve the crisis.
He further stated that the shortage of urban land, especially in high-demand areas, remains a critical issue for the affordable housing market. Puri suggested that the government could release centrally controlled land, particularly land managed by organisations such as Indian Railways, Port Trusts, and the Department of Heavy Industries, to ease the land scarcity and facilitate affordable housing projects. This, he argued, would help revive the affordable housing segment and make it more accessible to middle and lower-income groups.
Rising Property Prices and the Shift to Luxury Segment
Beyond affordable housing, the broader real estate market is showing signs of slowdown, primarily due to the rapid rise in property prices over the past three years. For many, the dream of owning a home has become increasingly elusive as construction costs and property prices have soared. In response to the stagnant demand in the lower price brackets, leading real estate players have increasingly shifted their focus towards the luxury segment. Pradeep Aggarwal, founder and chairman of Signature Global, noted that a revision of the current tax exemption limit on housing loans to ₹5 lakh, in line with the rising cost of property and construction, could offer much-needed relief to homebuyers in the middle-income category.
However, the growing emphasis on luxury homes in a time of declining affordability raises questions about the sustainability of this shift. While the high-end segment continues to thrive, it’s clear that the real estate market needs a more inclusive approach that balances both luxury and affordable housing. Industry experts argue that the government must take proactive steps to stimulate demand in all segments of the housing market, ensuring that homes remain within reach for a wide range of buyers.
A Sustainable Approach to Affordable Housing
While the demand for affordable housing continues to grow, it’s important to consider the sustainability angle in addressing this crisis. For real estate to thrive in the long run, it must be built in a way that supports both economic and environmental sustainability. As urbanisation increases and more people move to cities, the pressure on housing and infrastructure will intensify. In light of this, developers and policymakers must prioritise eco-friendly designs, energy-efficient buildings, and sustainable construction practices. Implementing green initiatives like rainwater harvesting, solar power, and waste management in affordable housing projects will not only contribute to environmental sustainability but also reduce the cost of living for residents.
As we move towards a future where sustainability is key, it is essential for the government to align housing policies with these long-term goals. Only by embracing sustainable development principles can the government ensure that the affordable housing sector not only recovers but thrives, meeting the needs of millions while preserving the environment for future generations.
