How India Can Bridge the Luxury–Affordable Housing Gap? Anarock's Aayush Puri Explains

We are witnessing a remarkable shift in India’s housing market. What used to be a niche segment—luxury housing—has now grown into one of the most active categories in urban real estate. Bales of luxury homes (those priced above Rs 1.5 crore) more than doubled year-on-year across the top seven cities, jumping from 63,700 units in 2022 to over 1.2 lakh units in 2023. That’s not a cyclical bump—that’s structural momentum.

This demand, primarily driven by HNWIs, has naturally lifted price bands. In cities like Mumbai and Delhi NCR, even peripheral areas such as Mulund, Chembur, and Noida Extension are witnessing 15–25% price escalations on premium inventory. Buyers today are not just chasing square footage—they’re looking for curated living: branded residences, better ventilation, private elevators, wellness spaces, and ESG features.

Interestingly, many of these buyers are not legacy business families. A sizable chunk of new demand is coming from startup founders, professionals in tech and finance, and first-generation wealth creators—people in their 30s and early 40s. And unlike the past, where luxury homes were bought for investment or rental yield, today’s buyer is looking to live in these spaces. This change in end-use intent is what’s truly pushing developers to reimagine design, amenities, and pricing.

NRIs have always had a soft corner for Indian real estate, but 2023 marked a significant uptick in intent and action. According to various estimates, NRI investment in Indian real estate touched $13 billion last year, with a noticeable tilt toward luxury properties. Part of this has to do with currency arbitrage, but a lot of it is emotional: a desire to maintain roots in India, or a plan for eventual return.

What’s new is where and how they’re investing. NRIs are no longer restricting themselves to the metros. We’re seeing serious interest in Pune, Goa, Kochi, and even tier-2 lifestyle corridors. Many prefer developer brands with strong governance, and expect seamless digital experiences—think e-visits, online documentation, and instant payment gateways.

We have noticed a distinct jump in NRI-led inquiries for luxury homes, particularly in Dubai, Singapore, and London-originated channels. These aren’t just leads—they’re informed buyers who’ve done their research and want high-end, ready-to-move homes with smart tech and gated security. And yes, they’re willing to pay a premium.

But one unintended side effect of this foreign capital is that it sets a new pricing benchmark, often leading to inflated expectations from domestic buyers as well. That ripple effect is real, and it’s something developers are still learning to navigate.

This is a tough but important conversation. The enthusiasm around luxury launches has outpaced that of mid-income housing by a wide margin. Luxury housing supply grew 47% in 2023, while mid-income housing (Rs 40–80 lakh) barely managed a 11% increase.

What this tells us is that developers, especially in metros, are gravitating toward high-margin units. The problem? Land in cities like Mumbai, Bengaluru, and Hyderabad is finite. So, when developers use redevelopment rights and FSI to build larger, more profitable 3–4BHK units, the 1–2BHK options vanish. This isn’t just an affordability issue—it’s a supply chain issue for middle-class homebuyers.

Worse, the luxury label often lifts the entire micro-market’s perceived value. We’ve seen per sq. ft. rates climb across the board once a few high-end towers go up—even if they don’t cater to the local demand profile. This sort of market distortion could be mitigated if urban local bodies incentivized mixed-income development through policy nudges and flexible zoning.

If there’s one thing real estate teaches you, it’s that pricing doesn’t move in isolation. As city-center prices become prohibitive, both housing and jobs start moving outward. Areas like Outer Gurugram, North Bengaluru, and West Hyderabad are growing rapidly, but not always with the infrastructure to match.

At Harvard, where I did my master’s in real estate, one of the most compelling modules I took focused on using real-time urban data to inform zoning. We looked at cities like Singapore and Helsinki that use telecom and mobility data to proactively plan infrastructure investments. That’s a conversation India needs to have more openly—how do we ensure that expansion is not just horizontal, but smart?

Unplanned expansion leads to commute fatigue, poor air quality, and disjointed social ecosystems. And when price points lock entire demographics out of ownership, it creates long-term urban inequality. So yes, prices matter—but what we build around those prices matters even more.

It’s a classic conundrum: margin versus mission. Luxury homes offer developers higher ROI (return on investment), faster cash flows, and branding power. Affordable housing, while critical to India’s housing story, comes with lower margins and a complex regulatory environment. Add to that delays in PMAY subsidies and land acquisition hurdles, and you can see why many private developers are cautious.

Some firms have started experimenting with cross-subsidy models, where luxury and affordable units coexist in vertical formats. Others are entering PPP frameworks with state governments. But we’re still in early innings. The big shift will happen when affordable housing becomes financially compelling, not just socially desirable. That means rethinking tax incentives, fast-tracking clearances, and most importantly, unlocking land in better-served locations.

A few things stand out:

First, we need to give rental housing a proper push. The Model Tenancy Act is a step in the right direction, but its adoption is patchy. Cities like Ahmedabad and Surat have shown that it’s possible to create structured rental housing for migrant workers and students. Scaling that nationally will be key.

Second, land record digitization is long overdue. A transparent, national platform for clean land titles—like Dubai’s REST system—could significantly cut litigation and project delays. It would also attract more institutional capital, especially into affordable and mid-income segments.

Third, we need to actively support the missing middle. Homes priced between Rs 50–80 lakh serve India’s working professionals—teachers, government staff, IT employees—but don’t get the attention that luxury or EWS housing does. Structured tax breaks, GST optimization, and easier credit access could make a big difference.

Real estate in India has always relied on brokers—but the system was informal, fragmented, and opaque. That’s now changing fast. At ANAROCK Channel Partners (ACP), we’ve built a tech platform that brings together over 8,000 brokers across MMR into one tech-enabled ecosystem.

What’s exciting is that this isn’t just about digitization—it’s about creating a real-time intelligence layer for developers. We can now track which configurations are moving fastest, what price points are resonating, and where NRIs are showing demand. Developers use this data not just to sell smarter, but to design better.

In fact, we’ve seen a 20% improvement in lead conversion and notable reductions in marketing spend on several projects by simply leveraging broker feedback loops through ACP. As a distribution model, this changes the game—we’re moving from gut-based sales to data-driven growth.