The sale of affordable housing units is expected to remain subdued next year too due to low supply and lower buyer interest as interest rates on loans have still not fallen enough. Experts said affordable housing sales can only be propped up through more rate cuts and incentives for developers.
Despite cuts in goods and services tax (GST) and interest rates, affordable housing sales fell in 2025 as the benefits were minimal and supply lagged.
Why Supply is Vanishing
The sale of units priced under Rs 50 lakh dropped 17% year-on-year in 2025, launches dropped by 28% and the quarters to sell level stood at 8.7 compared with 8.2 in 2024, according to Knight Frank India.
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While GST reductions in September 2025 are directionally positive, the overall benefit amounts to roughly just 1% of the final product’s value, said Vivek Rathi, national director- research, Knight Frank India
“Sales exceed supply/ launch volumes in this segment which is contrary to the overall market where the opposite dynamic exists. This suggests that there might be a lack of viable options in the segment which is contributing to the depressed volumes,” Rathi said .
Prashant Thakur, executive director & head-research & advisory, Anarock Group, agrees. “Current trends indicate that the rate cuts have so far not had any major impact to boost the momentum significantly in this segment, “Thakur said .
The Reserve Bank of India has cut key rates by 125 basis points since February this year.
Overall sales share of affordable housing is expected to be around 18-19% of the total housing sales across cities in 2025. Back in 2024, out of the total sales of nearly 460,000 units in top 7 cities, affordable housing share stood at 20%. This share stood the highest in 2019 when out of nearly 261,000 units sold, 38% was within this segment, according to Anarock Research.
Redefining affordability
Rathi said both volumes sold and launched have consistently fallen over the past few years as the core of the market shifted to the higher priced segments.
The chief executive of an NBFC said developers lack interest in the segment due to economics of the segment. “There is no supply in the segment as developers are hardly looking at the segment. They don’t see profit in that. Everybody is looking at luxury as that has higher margins,” said the CEO.
Most developers have shifted to premium and luxury housing projects which carry margins of 30% and above as against affordable housing which have margins of 10- 15%, experts said.
If development is encouraged with material financial incentives in the FY27 Budget, this segment might just stabilise its ongoing fall, Rathi said .
Anarock’s Thakur said while demand continues to remain high in this segment, affordable housing may see less momentum in 2026 as well, unless the RBI announces further rate cuts that make home loan interest rates more attractive for this very cost-conscious buyers.
“One of the factors that can boost momentum would be if the government announces focused incentives for both developers and buyers,” he said.
The incentives include re-introduction of 100% tax holiday for affordable housing developers. He said the government should seriously reconsider revising the pricing definition of affordable homes city-wise. While the size of units as per its definition (carpet area of 60 square metres) is fairly appropriate, price (up to Rs 45 lakh) is definitely not viable across most cities, he added.
“For instance, for a city like Mumbai, a less than Rs 45 lakh budget is far too low and hence it needs to be increased to at least Rs 85 lakh. As for other top cities, the budget should be increased to at least Rs 60-65 lakh,” he said , adding that with this price revision, more homes will fall within the affordable tag and hence more buyers can avail of multiple benefits such as lower GST rates at 1% without ITC, government subsidies, and so on.