Affordable Housing Stalls as Premium Homes Dominate Market: Knight Frank Report

Quick Summary

• RBI Policy Rate Cuts: The Reserve Bank of India (RBI) has reduced policy rates by 100 basis points in the first half of 2025 to ease borrowing costs and improve liquidity.
• Real Estate Sentiment index: Knight Frank-NAREDCO report for Q2 2025 shows the Future Sentiment Score rebounding to 61, driven by optimism in premium housing and office markets.
• Premium Housing Growth: Residential projects priced above ₹10 million (₹1 crore) dominate growth, especially in cities like Bengaluru, Hyderabad, and NCR. About 70% of stakeholders anticipate stable or higher launches in this segment.
• Affordable Housing Challenges: Lower-ticket housing remains stagnant due to affordability issues despite financing schemes. Only 52% expect stable/improved sales within six months.
• Rising Prices Impact: Double-digit residential price increases were reported in Bengaluru, NCR, and Chennai.Larger price hikes combined with stagnating wages have widened affordability gaps for first-time buyers.
• Developer & Lender Focus Shift: Developers prioritize high-margin premium housing projects; banks and private lenders show cautious interest toward affordable inventory owing to lower returns and higher risks.

Indian Opinion Analysis

Cheaper credit from RBI’s rate cuts has yet to translate into substantial demand for affordable housing as interest predominantly shifts toward premium segments. Rising property prices coupled with stagnant incomes are deepening financial strain on budget home buyers even while developers refocus efforts on high-value inventory for better returns.

The inclination towards premium housing suggests a structural shift where both developers and lenders gravitate toward low-risk investments amidst an overall betterment in market sentiment. However,this creates a disparity between affordability goals aimed at economic inclusivity versus profit-driven growth strategies targeting affluent demographics.

Policy interventions such as targeted subsidies or more lenient GST measures might be necessary to revitalize affordable housing demand while ensuring broader accessibility across socioeconomic categories without compromising developer incentives.

Read More: Why Affordable Housing Lags Despite RBI Rate Cuts

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