US Tariffs Threaten to Pull the Brakes on India's Affordable Housing

 

Mounting trade tensions between India and the United States, driven by proposed tariffs of up to 50% on Indian exports, are poised to further strain India’s already fragile affordable housing sector. The segment, still reeling from pandemic aftershocks and surging input costs, faces the risk of a deeper slump if the tariff measures materialize.

 

Affordable housing defined as homes priced at up to rs 45 lakh has seen a sharp contraction in recent years. According to ANAROCK Group, such homes accounted for only 18% of sales in India’s top seven cities during the first half of 2025, down from 38% in 2019. In absolute terms, just 34,565 affordable units were sold out of a total 1.90 lakh during this period. Project launches have taken an even steeper hit, plunging from 40% of total launches in 2019 to a mere 12% this year.

 

The sector’s performance is closely intertwined with the fortunes of India’s micro, small, and medium enterprises (MSMEs) and small and medium enterprises (SMEs). These industries form the backbone of the country’s export economy, contributing nearly 30% to GDP and over 45% to exports, while employing more than 260 million people across labour-intensive sectors like textiles, engineering goods, auto components, gems and jewellery, and food processing.

 

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This vast workforce also forms the primary customer base for affordable housing. In recent years, MSME exporters have surged by 228%, rising from 52,849 in FY 2020-21 to 173,350 in FY 2024-25. But looming tariffs could slice into export earnings, threatening jobs, compressing incomes, and consequently weakening housing demand in this already vulnerable segment.

 

“This category of homes priced Rs 45 lakh or less was already gravely hit by the Covid-19 pandemic and is still struggling to find any semblance of firm ground", said Dr. Prashant Thakur, Executive Director Research & Advisory, ANAROCK Group. “Trump's mercenary tariffs will snuff out even the dimmest ray of hope for this segment”.

 

Thakur likened the potential impact to a 'chakka jam' for the affordable housing vehicle, blocking the homeownership dreams of India’s largest lower-income population segment. He cautioned that any drop in demand would discourage developers from launching new projects, especially as they already grapple with inflated input costs and tight working capital.

 

The ripple effects may also hit housing finance companies that cater to this segment, which could face higher default risks and lower loan disbursements. For developers, weaker demand will inevitably translate into fewer launches and more financial pressure.

 

If the tariffs are implemented, they may create a vicious cycle job losses reduce housing demand, lower sales limit developer activity, and constrained capital stifles new launches further eroding the affordability landscape in India’s urban housing market.