Over the years, there has been a stable demand and steady growth in the affordable housing segment in India. The term ‘affordable’ may be debated, but it generally falls within Rs 5-50 lakh. At HomeFirst, the average loan size is between Rs 10-15 lakh, and I’ll keep my commentary focused on this bracket. As we go higher up the loan size ladder, preferences shift slightly, and the weight each priority holds changes–but by and large, they still follow the pattern outlined here.
Evolving housing needs
To understand borrower preferences, we have to get to the brass tracks of buyer sentiment. For the vast majority, this is about first-time homeownership. Almost always, it’s the first house the family will ever own. That house could be far from their workplace, their children’s schools, and other basic amenities. But the family still wants to own it. A little compromise on location, layout, or immediate convenience is okay–the emotional and financial security of ownership trumps all.
This is especially true when you account for migration and nuclearisation. Migration from rural to urban and smaller towns to bigger cities has exploded, largely driven by employment opportunities and aspirations. With migration comes a shift in living patterns–the move from joint families to nuclear households. This change fuels demand for smaller, more affordable homes that one can call their own, even if it means buying on the city’s outskirts or in upcoming suburbs. For many migrants or newly nuclear families, homeownership is a statement of stability in a new environment, a stake in the ground that says, “We belong here.”
Which brings us to our first and most defining trend: affordability. Unironically, the only major trend in affordable housing is, well, affordability. Priority number one is clear: the house that fits within my budget and doesn’t stretch me too thin. Only after this do the first set of viable options emerge.
The next trend–the second biggest reason to buy a home–is where things start to diversify. Factors like basic hygiene, a decent neighbourhood, and proximity to work or school begin to shape the decision. These are heavily influenced by lived experiences: the quality of current rental housing, landlord dynamics and family priorities.
Maybe only after these are ticked off does an affordable housing customer even think about “extras” like a nice balcony view, the look of the tiles, or the paint colour of the building.
Next up: loan preferences
Sorry to disappoint, but the simplicity of the logic continues.
Customers want a home loan that gives them maximum loan value against their property, accurately captures their eligibility, delivered through a fast, guided process that explains and assures every step–without making them miss a day of work. The last point is critical. And if that seems unreasonable, then you likely underestimate what a day’s pay means to many of the customers. The home loan cannot hamper the very income source that is going to pay it. And through all of this, the customer must be kept informed and in control.
For lenders, working with an affordable customer requires more patience and groundwork compared to a prime one. But like any successful financial product, the offering has to meet the customer where they are, not the other way around.
The documentation process, especially, needs to be largely handled by the lender. In the affordable segment, if you expect the customer to take ownership of paperwork or go from counter to counter to chase down every document, it’s just not going to work. The customer neither has the bandwidth nor the energy to assemble an extensive paper trail. Time and trust are currency here–and the product experience must reflect that.
Is the sector adapting to the demand?
When it comes to affordable housing, nothing in these trends will surprise anyone deeply familiar with the sector. The question is: how well are companies willing to adapt to these basic needs? Can you commit to walking the entire home loan journey at the customer’s pace, with their comfort and understanding at the centre, and customising every step accordingly?
And the same logic extends to builders, too. A well-designed home means little if it’s priced out of reach, carelessly maintained or located miles away from basic infrastructure. In the affordable segment, construction quality, layout efficiency, and thoughtful location choices must align with the customer’s lifestyle.
Whether it’s the lender or the builder, the challenge in affordable housing isn’t complexity–it’s commitment. Migration will keep bringing new households into cities. Nuclearisation will keep increasing the need for independent housing units. And for the foreseeable future, the formula for an affordable HFCs success will remain the same: meet customers where they are, respect their constraints, and make the process so seamless that ownership feels inevitable.
(The author is Chief Marketing Officer, Home First Finance Company)
