Affordable housing Supply Dips sharply in India’s Tier 2 Cities

⁤ Updated June 15, 2025
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The availability of ⁤new affordable housing ⁢in India’s 15 leading tier 2 cities experienced a significant decrease, falling 54% in the first quarter of‍ 2025. This decline signals a reduced emphasis on the affordable housing segment by developers.

Affordable housing is defined as properties priced below 5 million rupees. A report by ‍PropEquity, a real estate data analytics firm, indicated that overall housing supply in‍ these cities dropped ⁢35% to 30,155 units during‍ the⁤ January-March period. Notably, 48% ​of​ new launches fell within the 5 million to 10 million rupee price range.

In the first quarter of 2024, the supply totaled 45,901 units, ‌wiht 36% priced between 5 million and 10 million⁤ rupees,​ according to PropEquity data. Bhubaneshwar ⁤saw the most substantial decrease, ⁤with a 72% drop to 772 units in Q1 ⁣2025. Nashik experienced the smallest decline, at ⁤2%, with 2,466 units.

Eastern ⁤and Central India recorded the largest decrease in new launches,with a 68% fall in‌ Q1 2025. Northern ‍India followed with a 55% decline, while Western and ⁣Southern ​India saw decreases of 28%⁣ and 26%, respectively. The seven state capitals within⁤ the top 15 tier 2 cities experienced a 43% reduction​ in supply during ‍the same period.

samir Jasuja,founder and CEO of PropEquity,said the decline reflects a ⁣shift in‍ developer priorities. ‍”Financially robust developers with strong balance ‍sheets ​look to launch premium homes in order​ to increase⁢ their profit margin. As an inevitable result, supply of homes under Rs‍ 50 lakh has seen⁣ a consistent decline⁢ due to its unviability,”‍ Jasuja‍ said.

Jasuja added that homes priced ⁣between 10 million and 20 million rupees have seen a 17%⁢ year-over-year growth in supply, with their share increasing from 18% to 23%.

According to Jasuja, a recent⁤ 50-basis-point reduction in‍ the repo rate by the Reserve Bank of ‌India, coupled with⁢ home loan rates around 8% to 8.5%, will likely further reduce home loan rates, boosting demand for​ homes priced between 5 million and 20 million rupees in tier 2 cities.

“The tier 2 cities present a huge prospect for corporates and developers as massive ⁤infrastructure development and government’s focus on ‌making these cities as growth drivers will enable end-user​ demand,” Jasuja said.

Housing units priced under 20 million rupees accounted for 95% of the total supply in Q1 2025, up from 87%‍ in the same ⁤period last year. The​ supply of units priced under 5 million rupees more than halved to 7,124 units in Q1 2025, compared to 15,420 units in the same period last year. Its​ share ​of the total supply fell from 33% to 24%.

similarly, the supply of units priced between 5 million and 10 ​million rupees dipped by 12%, but its ⁣share rose from ​36% to 48% in Q1 2025. The supply of⁢ units priced between 10 million and 20 million rupees‍ dipped by ⁢17%, but its share⁤ rose⁣ from 18% to 23% in Q1 2025. The supply of⁢ units priced ⁢at 20 million rupees and above dipped by 73% in Q1 2025,and its share⁣ dipped from 13% ​to 5%.

State capitals saw a 90% drop⁢ in‍ the ⁣supply of units priced under 5 million rupees and a 13% drop ​in‌ the ⁢supply⁢ of units priced between 5 million and⁤ 10 million rupees‍ in ​Q1 2025. Though, the supply of units‍ priced ⁤between 10 million and‍ 20⁤ million ​rupees rose by ‍31%, the⁣ report added.

what’s next

Industry observers⁣ will be watching closely to see if government incentives⁣ or policy changes can reverse the decline in affordable⁢ housing supply and ‌ensure‍ that housing remains ⁣accessible to a wider range of income⁢ levels in​ India’s rapidly developing tier 2 ⁣cities.