MUMBAI: The affordable housing market is slated to touch Rs 67 trillion, offering lenders a goldmine of Rs 44.6 trillion in funding opportunities by 2030 when over 31 million units will be deployed, says an industry report.
According to realty consultancy firm Knight Frank, the existing shortage plus the upcoming demand for affordable housing segment is estimated to be 30.7 million units by 2030.
The opportunity to finance 30.7 million units is calculated to be Rs 44.6 trillion taking the market to Rs 67 trillion.
By 2030, as many as 22.2 million housing units will be required in urban centres of which 95.2 percent or 21.1 million units will be concentrated in the affordable housing segment. This is on top of the existing shortage of 10.1 million units, according to the agency. Nearly half or 45.8 per cent of the demand will be concentrated amongst the economically weaker sections.
According to its analysis, the cumulative affordable housing demand in the country is projected to reach 31.2 million by 2030, with the market size estimated at Rs 67 trillion.
The current portfolio of affordable housing loan is estimated to be Rs 13 trillion with housing finance companies constituting Rs 6.9 trillion and commercial banks holding Rs 6.2 trillion.
Based on an assumption of a 77 per cent loan dependency and loan-to-value (LTV) ratios applied at various loan thresholds, the potential financing opportunity for banks and housing finance companies in the affordable housing segment is around Rs 45 trillion and the rest by banks.
Between 2011 and September 2024, the affordable housing segment attracted capital inflows of $1.6 billion, which is just 9.8 per cent of the total capital directed towards the residential sector and a mere 3.6 per cent of the overall real estate sector inflows. Of this foreign investments accounted for only 15 per cent of the total private equity inflows into affordable housing, Shishir Baijal, chairman and managing director of Knight Frank India said.
The average cost of units in the affordable segment has risen considerably compared to the pre-pandemic levels of 2019, affecting affordability for homebuyers, particularly those in the EWS category.
For instance in Mumbai, the average launch price of an affordable housing unit has jumped from Rs 48 lakh in 2019 to R 73 lakh in 2024. This shows that the price of an affordable housing unit is beyond the RBI threshold.
In the MMR region, the average price of a residential unit with an area under 30 sqm rose 55 per cent between 2019 and September 2024 whereas the average launch price of a residential unit with an area of 60-160 sqm has increased only 29 per cent during this period.
The home loan EMI/income ratio of a household with an annual income of Rs 3 lakh has increased from 43 per cent in 2020 to 62 per cent in 2024, indicating a 19 percentage points jump.
This escalation is a consequence of the combined impact of interest rate hikes and price rises. In contrast, the EMI/income ratio of a household above the MIG category with an annual income of Rs 12 lakh has increased by 13 percentage points, from 28 per cent to 41.