It is a dramatic change that the real estate industry in India is experiencing. The cheaper housing sector that used to be very popular is gradually declining whilst the high-end houses are experiencing unparalleled popularity. As recent statistics published in The Indian Express reveal, the proportion of affordable homes, i.e. those with prices lower than 40 lakh in the top 7 cities has decreased, compared to some 37 in 2021, to merely 18 in the first half of 2025. The luxury housing, on the other hand, which costs above 1.5 crore, has increased both in quantity and price.
This shift brings out the change in buyer aspirations and purchasing power. During the pandemic, the demand of cheap houses increased because the buyers wanted to have a settled home, to own. Nevertheless, following economic recovery after the pandemic, urban professionals, NRIs and investors have turned their attention to high-end properties, which can accommodate more people with better facilities and connectivity. This trend has also been exploited by the developers who have introduced high-end projects in metros which include Mumbai, Delhi-NCR, Bengaluru, and Hyderabad.
The decline in low-end market is associated with the increase of construction prices, land prices, and interest rates. It is becoming a challenge to the developers to sustain profitability in the low-cost housing sector, particularly where the material and labor costs are skyrocketing. Moreover, affordable housing programs, which are supported by the government, like Pradhan Mantri Awas Yojana (PMAY) have been dragging in implementation, even further weakening supply. This has seen developers focusing on mid-income and luxurious projects which have better margins and faster payback period.
This change has extended social equity as well as housing policy implications. Affordable houses are very important in the development of the urban area because they serve the interest of first-time homeowners and the poor families. The shrinking of the segment will increase the housing gap compelling most potential homeowners to the rental markets. Incentives are possibly to be reconsidered (considered tax benefits, land subsidies, and accelerated approvals) to stimulate interest by developers in the affordable category of housing.
In the meantime, the luxury housing boom is being driven by India’s new and expanding affluent population together with high influx of NRI investment. Customers are demanding high-end finishes, sustainable design and smart technologies in their homes. Luxury housing has now become a symbol of status, lifestyle and security not merely a shelter.
The present market trend shows a two sided reality whereby luxury housing is doing well whereas affordable housing is performing poorly. To have a balanced growth in the real estate industry in India, the focus should be put again on inclusiveness so that the dream of homeownership is not lost to any income category.
