Is The Middle Class Being Priced Out? Why Indians Are Choosing Premium Homes Over Affordable Ones

The latest ANAROCK Homebuyer Sentiment Survey (H1 2025) reveals a decisive consumer shift in India’s housing market: 36% of buyers now prefer homes priced between Rs 90 lakh and Rs 1.5 crore, compared to just 18% in the pre-COVID era.

In contrast, affordable housing (<Rs 45 lakh) has fallen to a mere 17% share, down from 40% in 2019.

Why Affordable Housing Is Losing Ground
According to the survey, 62% of affordable homebuyers are dissatisfied with current offerings, citing poor project locations, small unit sizes, and low construction quality.

A staggering 92% complained about accessibility issues, including poor connectivity to healthcare, schools, and workplaces.

“Affordable housing is no longer synonymous with value if buyers feel compromised on quality and convenience,” said Anuj Puri, Chairman, ANAROCK Group.

'It might not be prudent to say that consumers are moving away from affordable homes. India is a vast market with a massive aggregate housing demand. There are broadly multitude consumer brackets spanning premium, high mid-income, mid-income and affordable. They all function largely independent of each other and there is a visible appetite for each of them. 
Now coming to the premium segment, yes of course the category is growing at a staggering speed. There is spike in demand for spacious and lavish homes with topline amenities. There are multiple factors behind the bull run. This includes rise in disposable income, propensity to pay a premium in return of better values and a general shift that is marked by willingness to pay rather than save. 
As the Indian economy is rising fast, there is a rising number of well heeled households comprising corporate professionals, c-suites, consultants, start-ups owners, media professionals, business owners, lawyers, doctors, etc. who are now entering the market with deep-pockets,' said Ankit Kansal, Managing Director 360 Realtors.
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Ashok Singh Jaunapuria, MD & CEO, SS Group, said, "The shift towards premium homes is being driven by rising aspirations of the middle-class buyer, who today prioritises lifestyle, connectivity, and quality over mere ticket size. Homebuyers are willing to stretch budgets for better design, premium amenities, and prime locations that promise long-term value. Developers, in turn, are realigning their portfolios to cater to this preference, with a sharper focus on mid-to-premium and luxury segments. While affordability challenges and delayed decision-making are realities, the premiumization trend is here to stay, as urban buyers increasingly see homes not just as an asset, but as an upgrade in quality of life."

The Rise of the Aspirational Buyer
The middle-class dream has clearly evolved. Rather than settling for budget options, buyers are increasingly stretching finances to access better-located, larger, and well-designed homes.

This is reflected in the rising demand for 3BHK units, which dominate preferences in Delhi-NCR, Hyderabad, and Bengaluru. “Homebuyers are willing to pay a premium if it guarantees quality and timely delivery,” noted Puri.

Developers Respond to Market Signals
With affordable housing demand shrinking, developers have reoriented supply. The share of new launches in the budget segment dropped from 18% in H1 2023 to just 12% in H1 2025, ANAROCK data shows. Instead, premium and mid-segment launches dominate, especially in metropolitan markets where rising disposable incomes support aspirational buying.

‘as the demand is evolving, supply sides are also recalibrating at breakneck pace. Developers are coming up with gated societies, high rises (25+ floors), plotted villas, penthouses, etc. Similarly, there is also a rise in niche yet expansive concepts such as second homes, branded homes, farm plots (0.25/ 0.5/ 1 acres). Developers and builders are introducing a slew of topline amenities such as swanky clubhouses, sporting arenas, techno gyms, wellness centres, private party decks, 24-hour cafes, zen gardens, yoga centres, waterbodies, etc.,’ said Kansal.

Premiumization as the New Normal
The survey underlines how India’s housing market is undergoing “premiumization”, as aspirations rise faster than affordability challenges can be solved. While developers are keen to chase this segment, policymakers may need to rethink affordable housing strategies to ensure inclusivity. For now, the Indian middle class appears set on trading affordability for aspiration.

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