Market Mix - Luxury Booms, Affordable Dooms

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Small Developers Face The Heat Amid India’s Luxury Real Estate Boom

On an early March morning, Jamshed Ahmed, a builder and co-owner of Gurgaon-based J3 Design Expansion, gears up to visit his latest project. The housing development project in Gurugram has 10 flats valued at around Rs 1 crore each, but Ahmed, who has been in the construction and real estate industry since 2010, is worried about selling them. 

Ahmed has been primarily taking on entry-level or affordable housing projects with his father, who started the company in 1984 — a period that saw a massive real estate boom following India's economic liberalisation. 

For years, Ahmed and other builders thrived during the pockets of India’s real estate boom, like the one that followed the pandemic. But now, there is a significant challenge looming over the sector. The latest data shows that Ahmed’s worries about not selling the houses in his latest project aren’t unfounded. 

Not only did the housing supply in the top nine cities fall by 34%, but sales declined by 23% in the last quarter of FY 2025. Among the top nine cities, only Bengaluru was an exception to this trend while Hyderabad, Chennai, Kolkata, Pune, Thane, Navi Mumbai, Mumbai, and Delhi-NCR saw a decline in either supply or sales or both.

While luxury real estate in India booms and makes records, the sales of entry and mid-level homes have been affected due to the rising cost of labour, land and incomes not matching the increase in prices. This is not only affecting buyers’ purchasing power, it is also impacting smaller real estate businesses. Some are exiting the real estate market, consolidating with larger players or struggling with unsold inventory and debt. 

Where Are The Affordable Homes?

Ahmed said that entry-level houses priced below Rs 50 lakh were abundant in areas like Gurugram and Delhi in the past decade but now it was nearly impossible to build houses in this range in Gurugram or any prime location in Delhi.

"The prices have gone up significantly," he told The Core. "A house that cost Rs 55 lakh a few years ago now costs nearly Rs 1.5-2.0 crore."  

Between August 2022 and 2024, property prices in India's top eight cities surged by over 30%, more than twice the growth rate recorded in the previous two years, according to a report by Magicbricks. The report, Housing Affordability in Major Indian Cities, also highlighted that even tier-2 cities such as Gandhinagar, Bhubaneswar, and Patna experienced similar price hikes. This sharp increase outpaced the rise in nominal per-capita income across several major cities, raising concerns among buyers looking for affordable homes.

Chairman of ANAROCK Group, explained that several factors have led to this. "Rapid urbanisation has pushed affordable housing to peripheral locations with inadequate infrastructure, making these projects less attractive despite lower prices," Puri told The Core. 

What Next? 

Puri considers the growing imbalance between the luxury and entry-level a concern for the industry. He said the large volume of unsold inventory ties up capital, making it difficult for smaller developers to launch new projects or complete existing ones.

 "The carrying costs of unsold inventory — such as maintenance, security, and interest payments — are eating into already thin profit margins," he said. 

What could smaller developers do to come out of this financial stress?