Affordable vs Luxury: How Housing Demand Is Splitting Across Indian Cities

India’s housing market is no longer moving like one big wave. It’s splitting into two strong currents—affordable homes (budget-conscious, first-time buyers) on one side and premium/luxury (bigger ticket sizes, upgraded lifestyles, investors, HNIs/NRI buyers) on the other. In many cities, these segments aren’t just growing at different speeds—they’re being shaped by different forces altogether.

The result: “premiumisation” in big metros, and a more mixed, need-driven market in emerging and mid-tier cities.

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What “Affordable” and “Luxury” mean in India (in practical terms)

Developers and research firms use slightly different slabs, but these are commonly used reference points:

• Affordable often maps to sub-₹40–65 lakh thresholds depending on metro vs non-metro definitions used in finance and policy contexts.
• Mid / Upper-mid typically sits around ₹40 lakh–₹1.5 crore (varies by city and report).
• Luxury / Premium commonly starts around ₹1.5 crore+ in many market reports.

This matters because “affordable” in Mumbai or Bengaluru can look very different from “affordable” in Ahmedabad, Indore, or Vizag.

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The big shift: demand is moving up the price ladder in top cities

Across major markets, reports have been repeatedly pointing to rising demand in ₹1 crore+ homes and stronger performance of premium categories even when the lower ticket sizes soften.

• In Q1 2025, JLL data showed sub-₹1 crore sales falling sharply YoY, while ₹1.5–5 crore segments grew ~20–22% YoY, showing premium demand offsetting weakness in affordable sales.
• Knight Frank reported a strong H1 2024 market with rising prices across cities and highlighted improving fundamentals even as inventory patterns differed by segment.

In short: the top end is not just surviving—it’s driving market value in many cities.

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Why this split is happening (the real drivers)

1) Income polarization + formalization of demand

Higher-income salaried households (especially in tech, finance, consulting, global capability centers) can stretch to premium homes, while many entry-level buyers are squeezed by EMI + down payment + rising rents.

2) Supply is following margins

Premium projects often have:

• better margins,
• faster brand visibility for developers,
• more investor/NRI interest,
• and stronger upsell opportunities.

ANAROCK’s recent city dashboards show meaningful shares in mid-to-high segments and luxury categories in new supply.

3) “Lifestyle upgrade” demand post-Covid

Bigger homes, more amenities, better community infrastructure, and WFH-ready layouts pushed many households to “buy better once” rather than “buy small now.”

4) Wealth staying domestic

India’s luxury housing is also benefiting from capital staying within India and rising appetite for high-end real assets in prime micro-markets (e.g., Mumbai’s luxury clusters).

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How the split looks across Indian cities

Mumbai Metropolitan Region (MMR): luxury magnet + affordability stress

Mumbai’s premium markets are seeing global-style luxury momentum in pockets like Worli and BKC-adjacent corridors, while true affordability inside the city remains structurally hard due to land constraints.
Even global developers are choosing Mumbai as a focused bet (including rental-led premium strategies).

What it means: Luxury stays strong, but affordable demand shifts to farther suburbs, satellite nodes, or smaller unit sizes.

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Delhi NCR: premiumisation with new micro-markets

NCR has been one of the strongest “premiumisation” stories post-Covid, driven by:

• higher-end launches,
• gated communities,
• better expressway connectivity,
• and larger home preferences.

Knight Frank and other consultancies have consistently highlighted premium traction across top markets including NCR.

What it means: Demand increasingly clusters around premium corridors, while affordability gets pushed to peripheral belts.

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Bengaluru: strong mid-to-premium backbone

Bengaluru’s demand is supported by deep, steady end-user buying from tech employment, and price growth has been visible in recent cycles.

What it means: Mid and premium segments stay liquid; “affordable” exists but is more location-sensitive (commute, metro access, job hubs).

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Hyderabad & Pune: end-user heavy, but premium rising

Both markets have a large end-user base, but premium formats (bigger homes, amenity-led projects) have been taking share. Meanwhile, overall launches and absorption can swing quarter to quarter based on supply cycles.

What it means: Developers increasingly balance volume (mid) with margin (premium), and affordability depends on where infrastructure growth is headed.

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Chennai: value-led market, now attracting higher ticket sizes

Chennai has shown strong activity in several recent quarterly snapshots in top-city reports, reflecting both end-user demand and new supply shifts.

What it means: Buyers often still prioritize value and livability, but premium/luxury is becoming more visible in select corridors.

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Kolkata: mid & premium gaining ground

Recent coverage highlighted Kolkata’s growing tilt toward ₹1 crore+ categories and mid-to-premium dominance in sales/launches.

What it means: A city once known for price sensitivity is seeing a stronger premium buyer profile, especially in certain neighborhoods and new projects.

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Emerging cities (e.g., Vizag): affordability-led with premium/NRI pockets

In emerging markets, job and infra announcements can quickly lift demand—often first visible in affordable/mid segments—while premium demand comes from NRIs and investors in select projects.

What it means: These cities can offer the clearest “affordable home ownership” story—until price appreciation starts compressing affordability.

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What’s happening to prices (and why buyers feel squeezed)

Even when headline price indices look moderate nationally, city-wise movement varies meaningfully. NHB’s RESIDEX provides city-level housing price index indicators that show different trajectories across urban centers.

This creates a common on-ground experience:

• Affordable buyers feel locked out (EMI burden + limited new supply at low ticket sizes).
• Premium buyers feel urgency (upgrade now before prices climb further in prime micro-markets).

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Who wins, who struggles

Developers

• Premium/luxury: stronger margins, branding, higher per-unit profitability.
• Affordable: needs scale, faster approvals, cheaper land, and tighter execution—harder in top metros.

Buyers

• Affordable segment: most sensitive to interest rates, down payments, and commute costs.
• Luxury segment: less rate-sensitive, more lifestyle/investment-driven.

Investors

• Premium in prime micro-markets can look attractive, but selection matters (supply pipelines, rentability, resale depth). Recent reporting shows continued institutional/global interest in premium Indian residential strategies, especially Mumbai.

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How to think about it (if you’re buying)

If you’re an affordable buyer:

• prioritize connectivity (metro/expressway) over “biggest size,”
• check total monthly outgo (EMI + maintenance + commute),
• prefer projects with strong delivery track record.

If you’re shopping premium/luxury:

• micro-market is everything (not just “city”),
• compare supply pipeline vs absorption in that corridor,
• focus on build quality, amenities that hold value, and resale liquidity.

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The bottom line

India’s housing demand isn’t “up or down.” It’s splitting:

• Luxury and premium are expanding across top metros, supported by wealth, lifestyle upgrades, and developer focus.
• Affordable demand remains massive, but affordability constraints and limited low-ticket supply in prime areas are pushing buyers outward or delaying purchases.

If this divergence continues, India will effectively run two housing markets at once—one driven by aspiration and capital, the other by necessity and affordability.