India's Housing Market Pivots to Affordable Segment
The Indian real estate market is experiencing a shift in focus, as developers are now targeting lower- to mid-end homebuyers amidst a slowdown in luxury apartment sales. With projections indicating a doubling of families earning over five thousand dollars annually within the next two years, the demand for smaller, simpler apartments is expected to surge significantly.
“We haven’t touched the tip of the iceberg,” remarked Niranjan Hiranandani, founder of the Mumbai-based Hiranandani Group, regarding the potential for housing demand. Speaking at a property conference in Mumbai where mass housing was a prominent theme, Hiranandani added, “Young people don’t have housing open to them.”
The easing of regulations on inward investment in the construction industry by the Indian government in early 2005 propelled a boom in the property market, partially fueled by pledges of up to twenty billion dollars in foreign investment. Official data, however, reveals that only about two billion dollars have materialized over the past three years, coinciding with a cooling of real estate prices in the last six months.
Developers had previously concentrated on the high-end housing segment, maximizing their profit margins with projects such as 2,000 sq ft apartments in New Delhi suburbs priced at $250,000. But now, recognizing the purchasing power of young professionals in sectors with substantial salary growth, the focus has shifted. A young couple earning a combined $25,000 a year in the media or software industry, for instance, would require a more affordable option, roughly half the price of the luxury apartments. Developers are now recognizing this opportunity and designing projects accordingly, aiming to attract the young workforce in industries experiencing double-digit salary growth, such as real estate, information technology, and financial services.