Shoddy location, poor design: 53% unhappy with affordable housing options

Demand for affordable homes has nosedived since Covid-19, initially because this segment’s target clientele was financially impacted by the pandemic. However, at least 53% homebuyers are dissatisfied with the currently available options in this vital segment across cities, revealed the Anarock-FICCI Homebuyer Sentiment Survey.

 "The top three reasons for this disenchantment with the currently available affordable housing supply are bad project location accessibility, questionable construction quality and poor design, and constricted unit sizes," said Anuj Puri, Chairman Anarock,a real estate consultancy firm. 

 Of the dissatisfied affordable home seekers polled in the survey, a whopping 92% respondents identify project location as the biggest grouse, while 84% state low construction quality and inferior design elements as major deterrents. 68% respondents find the available unit sizes too small to be attractive.

Those buyers who are dissatisfied due to location accessibility, their main concerns included accessibility to healthcare services, to workplaces, security concerns and accessibility to recreation facilities.

Declining demand for affordable housing has had a cascading impact on its supply in the last one year.

The supply of affordable homes in major cities has shrunk, dropping from 26% of total launches in 2021 to just 17 per cent in the first nine months of 2024, showed data analysed by Anarock. 

 Prior to the pandemic in 2019, affordable homes made up 40 per cent of new projects.

"Bigger homes continue to dominate buyer preferences despite spiralling prices in the last one year," said Puri. 

Over 51% of the current survey respondents prefer 3BHK units and just 39% will settle for 2BHK options. 

City-wise analysis indicates that the demand for 3BHKs is particularly high in Chennai, Hyderabad, Delhi-NCR, and Bengaluru, where over 50% respondents prefer it over other flat sizes. Conversely, over 40% participants in Kolkata, MMR and Pune picked 2BHKs as their preferred option.

In terms of preferred stages of construction, the H1 2024 survey shows a significant trend reversal. The demand ratio of ready-to-move-in ( RTM) homes to new launches now stands at 20:25. In H1 2020, the RTM-to-new launches demand ratio was 46:18. One major reason for this shift is that most homebuyers favour projects by large and listed developers, who they are confident will deliver their homes on time.

Budget preferance among  buyers

Another key highlight of the H1 2024 survey is that at least 57% residential real estate investors are focused on steady rental income. This is far from surprising, since there has been a remarkable surge in rental rates across cities in the last two years (over 70% in prominent micro markets). Rental earning potential has therefore taken centre-stage as an investment motivator.

While interest in the currently available affordable housing supply continues to decline, premium and luxury homes continue to dominate demand - at least 45% survey respondents now prefer homes priced upwards of Rs 90 lakh. In the survey's pre-Covid 2019 edition, just 27% respondents were interested in properties in or above this price bracket.

The latest survey also identifies a growing preference for residential plots, which 20% of property seekers name as desirable options across cities. City-wise data highlights that this preference is most pronounced in the major Southern cities - 30% buyers in Chennai prefer it, 29% in Bengaluru, and 27% in Hyderabad. Several large and branded developers have launched residential plot projects in these cities over the last few years and continue to find ready takers.

Villas and row houses are also markedly in demand in these southern cities. Contrastingly, more than 70% survey participants in MMR, NCR and Pune prefer apartments.

The survey saw nearly 7,615 participants from 14 cities in India. 

Other Survey Highlights

• Real estate is the most preferred asset class for investment for over 59% respondents, up 2% against the previous survey
• 66% millennials & 42% Gen-X respondents will use their investment gains for purchasing a home in the future
• Over 67% buyers are seeking property for end-use vs 64% in H2 2023 survey
• Top homebuyer demands today include timely project completion assurance, construction quality improvement/assurance, and well-ventilated homes