The affordable housing segment experienced a notable contraction in the second half of 2025, with sales falling 17% compared to the same period in 2024. According to a Knight Frank India report, this decline occurred even as the segment's share of total residential sales increased marginally to 5% in H2 2025 from 4% in H2 2024.
This paradoxical trend—declining sales volume alongside growing market share—reveals important shifts in India's residential real estate landscape. The increase in market share suggests that while affordable housing sales dropped, other segments contracted even more sharply, pushing affordable housing's relative position upward.
The 17% Sales Decline Explained
The affordable housing segment, typically defined as properties priced below a certain threshold to serve middle and lower-income homebuyers, has long been a focus of government policy and developer interest. The 17% sales decline raises critical questions about affordability, financing availability, and buyer sentiment in this essential market segment.
Several factors likely contributed to this significant downturn:
- Rising construction costs: Increased material and labor expenses have squeezed developer margins, making it difficult to maintain affordable price points.
- Higher interest rates: Increased home loan rates have reduced buyer purchasing power and monthly affordability.
- Stricter lending criteria: Financial institutions have tightened approval processes, limiting access to financing for middle-income buyers.
- Economic headwinds: Broader economic pressures have constrained disposable income for target buyers in this segment.
Understanding the Market Share Paradox
While the 17% sales decline appears concerning at first glance, the increase in market share from 4% to 5% tells a more nuanced story. This shift indicates that premium and mid-segment housing experienced even steeper declines, making affordable housing relatively more attractive despite absolute sales falling.
This dynamic reflects changing buyer preferences and economic realities. As higher-income segments contract, the affordable housing category becomes a larger proportion of overall residential transactions, even if total volumes are declining across the board. The data suggests that buyers are trading down to more affordable options as economic conditions tighten.
What This Means for Homebuyers
For prospective homebuyers in the affordable segment, this data presents both challenges and opportunities:
- Limited inventory: The declining sales volume may indicate reduced inventory and fewer options available in the market.
- Increased competition: Fewer properties mean more competition among buyers seeking affordable homes.
- Potential for negotiation: The relative strength of the segment compared to other categories suggests continued developer interest and potential negotiating power.
- Financing challenges: Stricter lending criteria may require stronger financial profiles and larger down payments.
Policy and Future Outlook
Policymakers monitoring housing affordability will likely view this trend with concern. Government initiatives aimed at increasing affordable housing supply may need reassessment to address the underlying factors driving the sales decline. The data underscores the importance of supportive policies including favorable financing options, tax incentives, and streamlined approval processes.
The H2 2025 data from Knight Frank India serves as a crucial indicator for the housing market's trajectory. The 17% decline in affordable housing sales, despite improved market share, suggests that the segment faces structural challenges requiring attention from both private developers and policymakers. As the market evolves, monitoring these trends will be critical for stakeholders across the housing ecosystem—from first-time homebuyers seeking entry into property ownership to developers and financial institutions supporting the affordable housing segment.
