The first half of 2025 has seen India’s affordable housing sector face mounting challenges, with its sales share in the top seven cities dropping to just 18% – a sharp decline from 38% in 2019.
This segment, defined by homes priced at ₹45 lakh or less, is primarily driven by demand from employees of micro, small, and medium enterprises (MSMEs) and small and medium enterprises (SMEs).
These enterprises form a crucial pillar of India’s economy, contributing nearly 30% to the GDP and over 45% to exports, while employing more than 260 million people both formally and informally.
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The recent imposition of 50% tariffs by the United States adds a significant new risk to this already fragile sector. MSMEs, deeply integrated into global supply chains, have been one of India’s top drivers of employment and export growth.
In fact, exports from MSMEs have surged by 228% in the past four years—from 52,849 units in FY 2020-21 to 173,350 in FY 2024-25.
However, tariffs threaten to disrupt this momentum, directly impacting the incomes of workers who form the largest buyer base for affordable housing.
Such income shocks in a highly price-sensitive segment could derail demand further, discouraging developers from launching new projects. The sector’s share of total housing launches has already plummeted from 40% in 2019 to just 12% in H1 2025.
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Affordable Housing: Housing Finance Companies May Face Higher Risks
As demand weakens, housing finance companies catering to this segment may face higher risks—ranging from rising loan defaults to reduced lending activity due to lower buyer confidence.
Developers, still reeling from post-pandemic cost escalations, would have to contend with tighter working capital amid reduced sales velocity.
Without timely intervention, the combined effect of post-pandemic recovery challenges and tariff-driven income disruptions could prove to be a double blow for affordable housing.
The sector, once the centerpiece of national housing policy and a driver of mass homeownership, now stands at a crossroads.
Policy coordination, fiscal safeguards, and targeted buyer support will be critical to preserving the dream of affordable homeownership for millions. The resilience of India’s affordable housing segment – and the aspirations it represents – depends on how effectively these challenges are addressed.
