High input costs force realtors to shy away from affordable housing

Bengaluru: Affordable housing is no longer affordable for real estate developers due to rising cost of inputs, land, and lack of government incentives. The various benefits and several interest stimulants that were offered to developers and consumers over the years since 2015 onwards, have expired in the last two years, thereby forcing realtors to shift focus from affordable housing. 

The affordable housing segment has remained sluggish in 2025, in terms of both sales and new launches.

The share of affordable housing in total sales has alarmingly dropped from an all-time high of 38% in 2019, to just about 18-19% across key cities in 2025, as real estate developers are shying away from launching new projects.

In 2024, the share of affordable housing sales stood at 20% of the total sales of 4.60 lakh units in the top 7 cities. The affordable housing segment witnessed its highest level of 38% in 2019, when the total sales stood at 2.61 lakh units, according to data provided by ANAROCK Research.

“Amid restricted new supply addition in this budget category, unsold stock in the affordable segment has seen the highest decline among all budget categories across top cities. This itself indicates that there is high demand in this segment,” Prashant Thakur, Executive Director & Head-Research & Advisory, ANAROCK Group, told DH.

However, he said, for various reasons developers are shying away from the segment with minimal new launches. Amid this minimal new supply, several buyers who are now looking to buy a home are coming forward and buying from the available stock, which was launched in previous years.

Mallanna Sasalu, CEO — South, Puravankara Limited, said the developers are not shying away from launching affordable housing projects. “A combination of factors are contributing to the slowdown in launching affordable projects. The industry is facing 55% rise in construction costs, 45% rise in labour costs, and another 6-8% rise in salaries of white-collar staff. Additionally, land prices have gone up steeply, which has made it difficult for launching affordable projects,” he said.

There is a need to redefine the affordable housing segment, as it is no longer viable to sell houses at Rs 45 lakh price tag, he added.

As per ANAROCK Research, amid restricted new affordable housing supply in the last year, unsold stock in this segment shrank by 19% — from about 1.27 lakh units in Q3 2024-end, to 1.05 lakh units by Q3 2025-end.

Out of the total new supply of approx. 4.19 lakh units launched in 2025, the share of affordable housing was a mere 15%. Back in 2024, the share stood at 16% out of the total 4.13 lakh units launched.

The developers have slowed down the launch of new affordable or budget housing projects due to absence of incentives from the government. The various benefits and several interest stimulants that were offered to developers and consumers in this market over the years since 2015 onwards have expired in the last 1-2 years. 

“It is imperative to revive and extend significant benefits, such as tax breaks, to encourage developers to construct more projects and make it possible for customers to acquire such homes”, Thakur said.

Homes priced Rs 40-45 lakh have been previously considered affordable homes. However, the term “affordable housing” is somewhat ambiguous as it lacks a universal definition, he said.

The Confederation of Real Estate Developers’ Associations of India (CREDAI) has requested the government to increase the price cap of affordable housing to Rs 90 lakh, from the current Rs 45 lakh, taking into consideration inflation and other cost factors.

CREDAI president-elect G Ram Reddy said the price cap of affordable housing has not changed for the past eight years. “We are looking to the Union Budget for urgent policy support,” Reddy told reporters earlier this month.

In order to boost supply and incentivise developers to build more affordable housing, the CREDAI has urged the government to reintroduce the ‘100% Tax Holiday’ benefit given previously to developers under Section 80-IBA in the Finance Act, 2016. This section provided for major tax relief for builders on the profits earned from developing and building affordable housing projects.