Trade Wars and Tariffs: The hidden cost on India's affordable housing sector
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MSMEs: The Economic Backbone at Risk
Tariffs Threaten Growth and Housing Demand
Financial Risks for Housing Finance Companies
The Road Ahead
The escalating trade tensions between India and the United States, highlighted by the imposition of steep 50% tariffs, are more than just a disruption in bilateral trade. If unresolved or unmoderated, these tariffs threaten to severely impact vulnerable sectors of the Indian economy — most notably, the affordable housing segment, which depends heavily on the country's MSME and SME workforce.Dr. Prashant Thakur, Executive Director – Research & Advisory at ANAROCK Group, warns that affordable homes priced at INR 45 lakh or less were already struggling to recover from the aftermath of the COVID-19 pandemic. The new tariffs imposed under the Trump administration risk extinguishing even the faintest hope of revival for this segment.Affordable housing in India is primarily driven by demand from the workforce employed by Micro, Small, and Medium Enterprises (MSMEs) and Small and Medium Enterprises (SMEs). These enterprises are deeply woven into India's export ecosystem and form the backbone of the economy. However, ANAROCK data reveals that in the first half of 2025, the affordable housing segment's share of total home sales in India's top seven cities fell drastically to just 18%. This is a stark decline from the 38% share recorded in 2019.To put it into perspective, of approximately 1.9 lakh units sold in H1 2025, only around 34,565 units belonged to the affordable category. Furthermore, new launches in this segment have shrunk from 40% in 2019 to a mere 12% in the first half of 2025.MSMEs contribute nearly 30% of India's GDP and account for over 45% of the country's exports. The sector has shown remarkable growth, with exports increasing by 228% over the past four years—from 52,849 in FY 2020-21 to 173,350 in FY 2024-25. Together, MSMEs and SMEs employ over 260 million Indians, formally and informally, across labour-intensive sectors such as textiles, engineering, auto components, gems and jewellery, and food processing.This massive workforce forms the core customer base for affordable housing. The segment caters to nearly 17.76% of India's population, which is about 1.46 billion strong.The imposition of tariffs threatens to put a halt to the otherwise promising opportunities for Indian MSMEs to expand their export footprint, establish global supply chains, and diversify revenue streams. The tariffs act like a 'chakka jam' (roadblock) on the economic vehicle driving affordable homeownership dreams for millions in India's lower-income groups.Dr. Thakur explains that disruption in income prospects for this vast workforce due to tariffs could derail demand for affordable housing, which is highly sensitive to income changes. This will inevitably impact sales, pushing developers to cut back on new launches amid tightening working capital conditions and ongoing input cost inflation since the pandemic.Housing finance companies (HFCs) that cater predominantly to affordable housing buyers face growing risks. The potential for increased loan defaults looms large if demand continues to fall, while lower sales will also reduce new loan disbursements, further tightening liquidity in the sector.India's affordable housing sector stands at a critical crossroads. Its future depends heavily on timely government intervention through coordinated policy measures, fiscal safeguards, and buyer-centric support. Once the flagship of India's housing vision and a key driver of financial stability for millions, affordable housing now hangs in the balance.Unless these challenges are met with strategic solutions, the dreams of homeownership for millions in India's MSME workforce could become yet another casualty of global trade tensions.
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