A Vestian research report shows private institutional investors in India are increasingly favouring luxury housing over affordable homes due to higher profitability, despite government incentives for the latter. Luxury properties now dominate new launches.
Private institutional investors are increasingly favouring luxury housing over affordable homes in India, driven by higher profitability and changing buyer preferences, even as the government continues to promote affordable housing, according to a Vestian research report released on Wednesday.
The report, titled, “Indian Real Estate: Key Trends Transforming the Investment Landscape”, showed that luxury and premium housing accounted for 56 per cent of institutional investments in the residential sector between 2011 and September 2026, compared with 44 per cent for affordable and mid-income housing.
Shift Towards Luxury Housing
The shift comes as affordable housing's share in new residential launches is estimated to have fallen to less than 10 per cent in the first half of 2026, from more than 50 per cent in the pre-COVID years.
The report stated, "For over a decade, the government promoted affordable and mid-income housing by providing incentives to developers and homeowners, whereas luxury/premium segment emerged as the preferred investment choice for investors due to better profitability."
According to the report, rising construction costs, changing buyer preferences and growing demand for larger, higher-quality homes have encouraged investors to focus on premium residential projects.
The share of luxury and premium housing in total residential launches increased from around 20 per cent in 2017 to more than 60 per cent in 2025, highlighting the growing preference for high-end properties.
The report noted, "High-end real estate has become a preferred investment asset class as it offers stable capital appreciation, protection against inflation, and relatively higher rental yields."
Divergence in Housing Priorities
The growing preference for luxury properties has also created a divide between government housing priorities and private investment decisions. While private investors increasingly favour premium projects, government-backed financing has played an important role in supporting affordable and mid-income housing.
The report highlighted that the Special Window for Affordable and Mid-Income Housing (SWAMIH) funds accounted for nearly half of the investments received by affordable and mid-income housing segments between 2019 and September 2026.
Launched in November 2019, SWAMIH Fund-I was established to provide last-mile financing to stalled affordable and mid-income housing projects registered under the Real Estate Regulatory Authority (RERA). According to the report, the fund has supported the completion of more than 58,596 homes across 146 projects, while SWAMIH Fund-II is currently being rolled out.
Future Outlook
The report observed, "This divergence is likely to remain a defining feature of India’s residential investment landscape, with policy-led capital supporting affordability and private institutional capital increasingly favouring the premium end of the market."
Looking ahead, report expects large private investors to continue driving investments in luxury and premium housing, while government-backed initiatives, including SWAMIH, are likely to remain important sources of funding for affordable and mid-income projects amid rising construction costs. (ANI)
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