‘Will snuff out the dimmest ray of hope’: Affordable housing market faces new challenge with Trump tariffs

India's affordable housing market faces a new challenge following the imposition of 50% tariffs by the US. Experts warn that if these trade measures are not moderated, they could severely impact this critical segment, which is essential for many vulnerable sectors.

Dr. Prashant Thakur, Executive Director - Research & Advisory at ANAROCK Group, highlighted the situation, stating, "This category of homes priced INR 45 lakh or less was already gravely hit by the COVID-19 pandemic and is still struggling to find any semblance of firm ground. Trump's mercenary tariffs will snuff out even the dimmest ray of hope for this segment." This segment's fortunes are closely tied to the country's MSMEs and SMEs, which play a significant role in driving demand.

ANAROCK data reveals that as of the first half of 2025, the sales share of affordable housing has plunged to just 18 per cent, or approximately 34,565 units out of a total of 1.90 lakh units sold across India's top seven cities. This is a sharp decline from a 38 per cent share in 2019, underscoring the sector's struggle to regain momentum post-pandemic.

The affordable housing segment caters to about 17.76 per cent of India's population, approximately 1.46 billion people, yet its supply has dramatically decreased. From accounting for 40 per cent of total launches in 2019, it now makes up a mere 12 per cent in the first half of 2025. The MSME sector, a backbone of India's economy, contributes nearly 30 per cent to the GDP and over 45 per cent to exports, emphasising its importance in the housing market.

Export activities from MSMEs have increased significantly, with numbers soaring by 228 per cent from 52,849 in FY 2020-21 to 173,350 in FY 2024-25. Despite this growth, Thakur noted, "Because of the disruption in this large workforce's future income thanks to the tariffs, affordable housing demand may very possibly derail and further impact sales in this highly income-sensitive segment."

The potential drop in demand could also affect housing finance institutions, leading to a higher risk of defaults and reduced disbursements. "Concurrently, such a drop in demand will curtail launches by developers, who will have to contend with tighter working capital due to lower sales. As it is, they have been grappling with serious input cost inflation since the pandemic," Thakur added.

The government's response to these challenges is crucial. Coordinated policy actions, fiscal safeguards, and buyer support measures will be vital in stabilising the affordable housing market. Without these steps, the sector may continue to face difficulties, impacting the homeownership aspirations of India's lower-income population, the ANAROCK report added.