Summary of this article
Outdated price caps misclassify affordable housing
Tier II–III cities drive real demand
Rising costs reshape housing affordability benchmarks
The Indian affordable housing segment is repeatedly being called out to be declining. This narrative now fully reflects the underlying dynamics that are unfolding in the Indian real estate segment. Much of this is backed by data, which follows an alternative definition of what is considered “affordable housing”. Citing data from 2025 on affordable housing launches, the segment has dropped to a small number of 12 per cent in 2025 from 40 per cent in 2019. As for the sales, they have dropped from 38 per cent to 18 per cent in the same time stamps. At face value, these figures raise concerns about the contraction and demand for the affordable housing segment in India.
In a conversation with Outlook Money, the CREDAI President, Shekhar Patel, emphasised that this decline is more apparent. The discrepancy between the two realities is due to the continued reliance on a price cap of Rs 45 lakh to define affordable housing. This benchmark was set back in 2017-18. He argues, “Due to inflation, a home that cost Rs 45 lakh in 2017-18 now costs around Rs 80 lakh. If affordable housing is defined by unit size (up to 90 square metres), rather than an outdated price cap, the segment is not shrinking. There is significant supply and demand for such units, particularly in Tier 2 and Tier 3 cities, though prices are now typically Rs 70 lakh to Rs 90 lakh.”
Ever since, inflation has impacted the input costs, land acquisition, construction and labour. Hence, the homes that were once in the Rs 45 lakh cap are now under a much higher one, even if their size and target audience haven’t changed, especially post-COVID.
This is a classification problem; housing units that once were qualified for affordable housing are now entirely excluded from the category, just because they exceed the price threshold set back then. Patel emphasises that if the definition and pricing brackets were to be revised and made to focus on unit sizes, the segment would paint a different picture altogether. As per this, the affordable housing segment has not contracted, just adapted to the evolving economic conditions.
He also shared insights on how this factor is closely tied to geography, while metro cities have seen a steady price rise, Tier-II and Tier-III cities are still driving this demand actively. Markets in these areas offer lower land costs and benefit from the significant infrastructure development in the last few years; this includes rail corridors, IT Hubs, and Global Capacity Centres (GCC).
The perceived decline of affordable housing in India is more about the limitations of the outdated definition and less about the weakening sector. As Patel highlights, there is a growing need to realign the policy frameworks to today’s time to avoid the risk of underestimating the segment’s actual scale.
