US Tariffs Put India’s Affordable Housing On The Brink

“This category of homes priced Rs 45 lakh or less was already gravely hit by the Covid-19 pandemic and is still struggling to find any semblance of firm ground. Trump's mercenary tariffs will snuff out even the dimmest ray of hope for this segment,” said Prashant Thakur, executive director - research & advisory, Anarock Group, in an official release.

Why are US tariffs a Direct Hit to Affordable Housing Demand?

The connection lies in the demography that drives this housing segment: the workforce employed in micro, small, and medium enterprises (MSMEs) and small and medium enterprises (SMEs). These businesses, often modest in scale, but deeply embedded in India’s export ecosystem, are among the most exposed to trade disruptions.

According to government data, MSMEs contribute nearly 30 per cent to India's gross domestic product (GDP) and over 45 per cent to India’s exports. Together, MSMEs and SMEs formally and informally employ more than 260 million people. Much of this labour is concentrated in sectors, such as textiles, engineering goods, auto components, gems and jewellery, and food processing industries that depend heavily on overseas orders, particularly from the US.

In the past four years, the presence of Indian MSMEs in export markets has surged. The number of registered exporters in this segment has risen by 228 per cent, from 52,849 in FY2020-21 to 173,350 in FY2024-25.

How do Falling MSME Incomes Translate to Fewer Home Sales?

Buyers of affordable housing are often first time home owners, who may not have the financial buffer to service a home loan in times of economic uncertainty and job crisis. A great many belong to the lower middle-income strata, for whom job security and regular source of income remain the topmost priority. 

The imposition of US tariffs could lead to lower volumes in the MSME sector, payment cycle delays and in some cases, even job losses or wage reductions. As such, taking a housing loan with the additional burden of equated monthly instalments (EMIs) in a situation of low job guarantee is something most employees will likely avoid.  “Due to the disruption in this large workforce’s future income thanks to the tariffs, affordable housing demand may very possibly derail and further impact sales in this highly income-sensitive segment,” said Thakur. Also, developers in this space operate on tight margins. Any dip in sales slows their cash inflows, making it harder to fund new projects. With fewer bookings, there’s little incentive to launch fresh supply either. Since the pandemic, construction costs have already risen sharply due to supply chain disruptions and material price inflation. This leaves little room for price cuts to stimulate demand.

If the current trajectory holds, developers may shift focus further toward mid- and premium-segment projects, where buyers are less sensitive to short-term income fluctuations.