Housing finance firms (HFCs) lending for reasonably priced properties are anticipated to see headwinds and defaults as a big phase of debtors working in SMEs and MSMEs, as a collateral harm, are seemingly to take the sharpest blow from the tariff imposed by U.S. President Donald Trump on India’s imports.
According to Central Government estimates MSMEs alone contribute practically 30% to the nation’s GDP and over 45% of exports. Over 260 million folks formally and informally employed in labour-intensive textiles, engineering, auto parts, gems and jewelry, meals processing industries which is able to take the biggest hit from the commerce conflict, really feel analysts.
“India’s affordable housing segment is mainly driven by demand coming from the country’s MSMEs and SMEs which, despite their relatively modest scale, are deeply integrated into India’s export ecosystem. Their workforces are the primary clientele for affordable housing,” mentioned Prashant Thakur, Executive Director – Research & Advisory, Anarock Group.
“Housing finance institutions that cater to this segment’s home loans will look at a growing risk – of defaults at worst, and dampened disbursements on account of lower demand at best,” he mentioned.
He mentioned post-pandemic, the demand for reasonably priced properties, which cater to about 17.76% of India’s inhabitants, declined, clearly reflecting in a drop in provide of reasonably priced housing. Its share of the whole launches plummeted from 40% in 2019 to simply 12% in H1 2025, he mentioned.
Now, with reasonably priced housing gross sales in crosshairs, the HFCs catering to this purchaser phase may even see extra mortgage defaults, he added. “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. Trump’s mercenary tariffs will snuff out even the dimmest ray of hope for this segment,” Dr. Thakur cautioned.
According to Anarock information, as of H1 2025, the gross sales share of reasonably priced housing has dropped to a mere 18%, or about 34,565 models of a complete of 1.90 lakh models bought in the high 7 key cities. “The fact that affordable housing had an overall sales share of more than 38% in 2019 shows how badly its momentum has faltered,” he mentioned.
He mentioned when the SME/MSME workers would discover the going powerful and can be in not place to contribute to the development of reasonably priced housing, this phase might collapse.
“So far, the global economy presented a major opportunity to Indian MSMEs to seize new export markets, build global supply chains, and diversify revenue streams. The new tariff imposition, if it takes hold, puts a roadblock on what should be a no-limits speedway – and a chakka jam on the affordable housing vehicle that drives the homeownership dreams of the largest lower quadrant of the Indian population,” Dr. Thakur mentioned.
“Because of the disruption in this large workforce’s future income thanks to the tariffs, affordable housing demand may very possibly derail and further impact sales in this highly income-sensitive segment,” he cautioned.
“Concurrently, such a drop in demand will curtail launches by developers, who will have to contend with tighter working capital due to lower sales. As it is, they have been grappling with serious input cost inflation since the pandemic,” he added. In brief, the destiny of India’s reasonably priced housing phase hangs in the steadiness. How the authorities addresses the challenge via coordinated coverage, fiscal safeguards, and buyer-focused assist measures can be pivotal, Dr. Thakur concluded.
