Demand for Affordable Housing Declines Post-COVID

Team L&M

Demand for affordable homes has sharply declined since COVID-19. Initially, this was due to the financial impact on the segment’s target clientele. However, the ANAROCK-FICCI Homebuyer Sentiment Survey – H1 2024 reveals additional pain points. At least 53% of homebuyers are dissatisfied with currently available affordable housing options across cities.

Anuj Puri, Chairman of ANAROCK Group, explains, “The top reasons for dissatisfaction are poor project location and accessibility, low construction quality and design issues, and small unit sizes. Among surveyed buyers, 92% cite location as the biggest concern, 84% point to construction and design flaws, and 68% find units too small.”

Shrinking Supply of Affordable Homes

Declining demand has directly impacted supply. ANAROCK data shows that affordable housing’s share of total launches dropped from 26% in 2021 to 17% by 9M 2024. Pre-pandemic, in 2019, affordable homes made up 40% of new projects.

Meanwhile, homebuyers are increasingly preferring larger homes. Over 51% of respondents now choose 3BHK units, while only 39% settle for 2BHKs. Demand for 3BHKs is highest in Chennai, Hyderabad, Delhi-NCR, and Bengaluru. In contrast, 2BHKs remain popular in Kolkata, MMR, and Pune.

Shift Towards Ready-to-Move-In Homes

The survey also shows a shift in preferred construction stages. The ratio of ready-to-move-in (RTM) homes to new launches now stands at 20:25, compared with 46:18 in H1 2020. Buyers increasingly trust large and listed developers for timely project delivery.

Rental Income Drives Investment Decisions

At least 57% of residential real estate investors now prioritise steady rental income. Rental rates have surged over 70% in prominent micro-markets over the past two years. Premium and luxury homes also dominate demand, with 45% of respondents preferring homes priced above INR 90 lakh. In 2019, only 27% were interested in this segment.

Growing Preference for Residential Plots and Villas

The survey identifies rising interest in residential plots, preferred by 20% of buyers. Southern cities lead this trend: Chennai (30%), Bengaluru (29%), and Hyderabad (27%). Villas and row houses are also in demand in these regions. Conversely, MMR, NCR, and Pune show over 70% preference for apartments.

Additional Survey Insights

• Real estate remains the top investment choice for 59% of respondents.
• 66% of millennials and 42% of Gen-X plan to use investment gains to buy homes.
• 67% of buyers seek properties for end-use.
• Key homebuyer demands: timely project completion, better construction quality, and well-ventilated homes.

Conclusion
While affordable housing struggles post-pandemic, larger homes, luxury properties, and residential plots are driving demand. Developers need to improve location accessibility, design, and construction quality to revive interest in this crucial segment.