Sales in the affordable housing category -- priced below Rs 40 lakh -- declined 18 per cent to 46,650 units in the January-June period across seven major cities amid lower supply and a rise in mortgage rates, according to Anarock.
Sales of affordable homes stood at 57,060 units in the corresponding period of the previous year.
Real estate consultant Anarock's report showed that the share of affordable housing in the overall housing sales fell to 20 per cent in January-June from 31 per cent in the corresponding period of the previous year.
The total housing sales increased to 2,28,860 units during January-June this year from 1,84,000 units in the year-ago period.
Anarock Chairman Anuj Puri attributed the shrinking share of affordable homes in the overall sales to changes in demand dynamics induced by the COVID pandemic and several other challenges faced by developers as well as consumers.
Stating that the land cost has gone up significantly, Puri said, "It is becoming increasingly unviable for developers to buy land at higher prices to build low-margin mass housing".
Other input costs have also risen inexorably in the last few years, he added.
"Launching affordable housing projects has become unattractive," Puri said.
Prospective home buyers in the affordable segment are postponing their purchase decision due to the rise in housing prices as well as interest rates on home loans, Anarock said.
On the supply side, the data showed that the share of affordable homes in total new launches across seven cities stood at 18 per cent in January-June against 23 per cent in the year-ago period.
Commenting on the report, Signature Global, which is mainly into affordable, founder Pradeep Aggarwal said the decline in sales of affordable housing units can be attributed to the limited supply of such properties.
"In recent years, the increased costs of land and inputs have left developers with limited room to create affordable housing options," he said.
However, Aggarwal said, the Haryana government's recent revision in affordable housing policy will lead to an increase in the supply.
He also demanded that other states should follow suit and offer incentives to developers to support the affordable housing sector.
Ambience Group Chief Business Officer Ankush Kaul said, "In a notable shift, Indian home buyers from dual or higher income households are now setting their sights on aspirational homes".
The impact of higher borrowing costs for home loans has also influenced this price-sensitive affordable housing category, Kaul said, adding that mid-income and luxury housing continue to perform well.
Garvit Tiwari, co-founder of brokerage firm InfraMantra, said, "In the midst of a dip in sales and an evident surge in housing queries, we find ourselves at the intersection of opportunity and challenge".
He expected a rebound in sales in the coming months.
As per the Anarock data, sales of affordable homes in Delhi-NCR fell to 8,680 units during the January-June period this year from 14,150 units in the year-ago period.
In Mumbai Metropolitan Region (MMR), there was a slight dip in sales to 17,470 units from 17,650 units during the period under review.
Sales of low-budget homes declined in Bengaluru to 3,270 units from 3,990 units.
In Pune, sales in this category were 9,700 units, down from 11,240 units in the first half of last calendar year.
Hyderabad saw a fall of more than 50 per cent in sales of affordable homes to 720 units from 1,460 units.
Affordable home sales in Chennai decreased to 1,820 units from 3,170 units.
In Kolkata, the sales of affordable homes declined to 4,990 units in January-June this year from 5,400 units in the corresponding period of the last year.