Affordable Housing Faces Supply Crunch Amidst Strong Demand, Says Sundaram Home Finance MD

D Lakshminarayanan, Managing Director of Sundaram Home Finance, discussed the current state of the housing market in a recent interview. He noted that overall housing demand has been robust and resilient, particularly in the top 8-10 cities, with smaller towns also showing rapid growth. However, the affordable housing segment presents a unique challenge: high demand is unmet due to supply-side constraints. Builders are increasingly focusing on the luxury segment because it offers higher profit margins and is less sensitive to price changes, leading to fewer units being developed in the affordable category.

Lakshminarayanan emphasized the need to adjust the definition of affordable housing based on local geography, rather than a uniform national standard. He believes the affordable housing market will recover and grow in the next 12-18 months, driven by genuine demand, especially in smaller towns. He also commented that tax changes, like GST rate cuts and income tax slab revisions, would boost property demand by increasing disposable income. Regarding interest rates, he observed that while repo rate cuts have led to lower lending rates, their transmission is slow, and small rate fluctuations have a limited impact on long-term home loan decisions.

Sundaram Home Finance is expanding its emerging business (EB) segment, which includes small-ticket and affordable housing loans. Currently comprising 3% of its business, the company aims to grow this to 10-15% by expanding its branch network, particularly in Tier II and Tier III cities. They are on track with their growth plans, with managed assets under management reaching ₹18,572 crore as of September 2025.

Impact This news provides insights into sector-specific challenges and growth strategies within the housing finance industry. It could influence investor sentiment towards companies focused on affordable housing and regional development. The expansion plans of Sundaram Home Finance suggest potential growth in the Tier II and III city markets. Impact Rating: 5/10

Definitions: GST: Goods and Services Tax, a comprehensive indirect tax levied on the supply of goods and services. Repo Rate: The rate at which the Reserve Bank of India lends money to commercial banks. AUM: Assets Under Management, the total market value of all financial assets managed by a financial institution on behalf of its clients.