A recent report by ANAROCK reveals a concerning decline in the share of affordable housing in overall sales and housing supply in H1 2023. The share of affordable homes has reduced by 11 percent compared to H1 2022, with the top 7 cities experiencing a significant drop from 23 percent to 18 percent. Additionally, affordable home buyers are burdened with almost 20 percent higher EMIs due to surging floating interest rates. Many buyers now face a scenario where the interest component surpasses the total principal amount, delaying homeownership and reducing potential gains from property appreciation.
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A recently published report by ANAROCK reveals a concerning trend as the share of affordable housing in overall sales in H1 2023 has significantly reduced to approximately 20 percent, marking an 11 percent decline compared to the same period in 2022. Similarly, in the top 7 cities, the share of affordable homes in the overall housing supply has plummeted to a mere 18 percent in H1 2023, a stark contrast to the 23 percent it held in H1 2022. Adding to the distress, affordable home buyers have been burdened with almost 20 percent higher EMIs over the past two years, with floating interest rates for home loans up to Rs 30 lakh surging from 6.7 percent in mid-2021 to nearly 9.15 percent presently.
In an alarming development, the total interest payable over a 20-year tenure has surpassed the principal amount for many buyers. The adverse consequences are evident when considering a property worth less than Rs 40 lakh with a total borrowed amount of Rs 30 lakh for a 20-year tenure. Buyers who initially paid an EMI of Rs 22,700 in 2021, when interest rates were around 6.7 percent, now face an EMI of Rs 27,300, leading to the interest component being higher than the total principal amount.
The current structure of home loans heavily front-loads the interest payments, hindering homebuyers from building equity in the early years. This unfortunate scenario not only delays homeownership but also reduces the potential gains from property appreciation if the property is sold due to a lesser principal amount being paid off. This worrisome situation is not only detrimental to individual borrowers but also poses a risk to the broader housing market. To counter this setback, it becomes crucial for focused policy interventions, possibly in the upcoming Union Budget, to rejuvenate the affordable housing segment.
Additionally, ANAROCK Research indicates a decline in sales numbers across the top 7 cities, further exacerbating the situation. In H1 2023, only approximately 20 percent of the 2.29 lakh units sold were affordable homes, compared to over 31 percent in the corresponding period of 2022. To address the pressing issue of housing shortages and fulfil the vision of "Housing for All," the government must prioritize making affordable housing more attainable for a broader spectrum of buyers. With the majority of the urban housing shortage lying in the affordable homes category, accounting for over 80 percent of the shortfall, focused efforts are essential to bridge this gap. This calls for a concerted effort to revive and nurture this critical segment of the housing market.
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