Affordable Housing Market Challenges

The decline in affordable housing's market share is raising concerns, prompting potential policy support to address this issue.

Current Market Dynamics

• Declining Inventory: Although unsold affordable housing inventory is diminishing, the rate is not satisfactory.
• Post-Covid Consumption Patterns: There is a shift towards luxury items, which is unsustainable without growth in small homes and cars.
• Developer Hesitance: Rising costs and thin margins deter developers from investing in the affordable segment.

Challenges and Solutions

• Weak Demand: Real wage growth is sluggish, impacting the demand for affordable housing and hampering the clearance of existing inventory.
• Supply Response: Without clearing inventory, the supply response remains weak.
• Redefining Affordability: Proposing to use income as a benchmark rather than absolute price to boost market dynamics.
• Land Price Challenge: Land price escalation outpaces income growth, necessitating caps on both house and land prices.
• State Government Role: State governments must actively work to clear the market and control land values to support affordable housing.

Economic Considerations

• Property Market Dynamics: India's property market is expensive relative to urbanization levels, with the affordable segment most sensitive to price changes.
• Economic Linkages: The affordable housing sector has significant economic and labor connections, necessitating government intervention to create sellable stock.