In a recent report by real estate consultancy ANAROCK, homebuyers in the affordable housing segment have been hit hard by a 20% increase in Equated Monthly Installments (EMIs) over the past two years across the top seven cities in India. The report highlights a direct correlation between the Reserve Bank of India’s (RBI) policy rate hike and the surge in floating home loan interest rates.
According to the ANAROCK report, the interest rate for home loans up to Rs 30 lakh has jumped from 6.7% in mid-2021 to nearly 9.15% as of the report’s date. This substantial rise has caused home loan borrowers who were paying an EMI of approximately Rs 22,700 in July 2021 to now pay Rs 27,300 per month, resulting in an increase of Rs 4,600 per month.
The surge in EMIs has also led to a significant jump in the overall interest component, with homebuyers now paying about Rs 11 lakh more in interest compared to 2021. Over a 20-year tenure, the total interest payable has crossed the principal amount, posing challenges for buyers seeking affordable properties.
The affordable housing segment, which faced setbacks during the COVID-19 pandemic, has not recovered fully over the last two years. A notable factor contributing to this decline is the increasing preference among buyers for larger residences following their lockdown experience. The ANAROCK report found that the share of affordable housing in overall sales during the first six months of calendar year 2023 has reduced to 20%, a decline of 11 percentage points compared to the same period in 2022.
Further analysis of the report reveals that the share of affordable housing in the overall housing supply across the top seven cities has plunged to 18% in H1 2023, down from 23% in H1 2022. Out of 2.29 lakh units sold during H1 2023, only about 20% (approximately 46,650 units) were in the affordable homes category, representing an 11% decline from H1 2022.
Experts emphasize that the declining sales in affordable housing highlight the pressing need for government intervention to make affordable housing more viable for buyers. With an urban housing shortage of approximately 11.2 million units, affordable homes priced below Rs 40 lakh constitute over 80% of the shortfall, indicating the critical importance of this segment in achieving the vision of Housing for All.
As buyers in the affordable housing segment grapple with rising EMIs and increasing interest rates, there is a call for measures to support this vital sector of the real estate market and enable broader access to homeownership for the masses.
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