Tariff Shockwaves: Can India’s Affordable Homes Survive?

When we talk about trade wars, our minds often wander to shipping containers, ports, and global supply chains. But what if I told you that a diplomatic clash thousands of miles away could decide whether a factory worker in Tiruppur, a jeweler in Surat, or a machinist in Ludhiana can ever buy a modest PROPERTY in their hometown?

That’s exactly the story unfolding in India today.

The United States’ steep 50% tariffs on Indian exports have sent tremors across the country’s economic backbone — the MSME and SME sector, which employs over 260 million people, contributes nearly 30% of GDP, and accounts for 45% of India’s exports.

The consequences go far beyond balance sheets. They threaten to derail one of the most fragile and socially critical sectors of the Indian economy: affordable housing.

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The Fragile Engine of Homeownership

Affordable housing — officially defined as homes priced up to ₹45 lakh — has long been the entry point to homeownership for India’s lower- and middle-income population. For years, it powered residential sales, often accounting for more than a third of the market.

But the numbers paint a grim picture.

• In 2019, affordable housing made up 38% of all home sales across India’s top seven cities.
• By H1 2025, that figure has fallen to 18% (34,565 units).
• New launches in this segment have shrunk from 40% in 2019 to just 12% now.

“This category was already gravely hit by the COVID-19 pandemic and is still struggling to find firm ground,” says Prashant Thakur, Executive Director – Research & Advisory, ANAROCK Group. “Trump’s mercenary tariffs will snuff out even the dimmest ray of hope for this segment.”

For a market that was once seen as the growth engine of India’s housing, the decline is nothing short of dramatic.

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Why Tariffs Hit Housing Hard

At first glance, tariffs on exports may seem like a distant problem for real estate. But here’s the chain reaction:

1. MSMEs dominate India’s export basket — from textiles in Tamil Nadu to auto components in Pune, from engineering goods in Rajkot to gems and jewelry in Surat.
2. These sectors are labour-intensive, meaning millions of workers depend on them for wages.
3. Tariffs cut into exports → lower orders → squeezed margins → layoffs or income cuts.
4. Workers with uncertain or reduced incomes postpone big purchases like homes.

The logic is straightforward: lower disposable incomes = weaker housing demand.

For developers focusing on affordable projects, that means slower sales. For housing finance companies, it spells both higher loan defaults and weaker disbursements.

The MSME Success Story at Risk

Until recently, MSMEs were one of India’s brightest economic stories.

• The number of registered MSME exporters surged 228% in four years, from 52,849 in FY21 to 1,73,350 in FY25.
• Their contribution to India’s exports climbed steadily, giving millions of workers hope for better lives and new opportunities.

Now, that trajectory faces a roadblock.

What’s at stake isn’t just export earnings — it’s the dream of homeownership for millions of India’s working poor and lower-middle-class families.

“If demand derails further, developers will curtail new launches, impacting the entire affordable housing ecosystem,” warns Thakur. “It’s not just a housing story — it’s an economic stability story.”

Kolkata: A Regional Flashpoint

Take Kolkata, for instance.

Here, 41% of all residential sales fall into the affordable category — far higher than the national average. With a large base of MSME workers, the city risks becoming one of the hardest hit.

While developers in the region express cautious optimism — calling the tariff impact temporary — the risks are clear: reduced affordability, delayed launches, and strained financing.

If Kolkata stumbles, it could become a case study for how trade wars ripple into local economies.

Developers Caught in the Crossfire

For builders, the tariff storm presents a painful choice:

• Absorb rising input costs (steel, aluminum, fixtures, cement) and take a margin hit.
• Or pass them on to buyers, which further reduces affordability.

Neither option is sustainable.

In many cases, developers may pivot away from affordable projects altogether, doubling down instead on mid-income housing (₹50 lakh – ₹1 crore) and premium segments that cater to more financially resilient buyers.

That shift is already visible in India’s housing data. And if it accelerates, affordable housing could find itself sidelined even further.

Finance Companies Feel the Pinch

Housing finance companies (HFCs), which play a vital role in affordable housing, face their own set of challenges:

• Weaker disbursements as fewer buyers qualify for loans.
• Rising defaults as existing borrowers from vulnerable sectors struggle to keep up with EMIs.
• Liquidity concerns, especially for smaller HFCs focused exclusively on low-income lending.

This financial stress could cascade into a credit crunch, hitting exactly those households who need the most support.

Is There a Silver Lining?

Believe it or not, some experts see a potential upside.

• Shift in demand: With affordable housing losing momentum, demand is tilting toward mid-income housing. Developers catering to this space may find opportunities to grow.
• NRI inflows: Trade disruptions abroad may push Non-Resident Indians (NRIs) to invest more heavily back home, especially in housing markets. That could inject much-needed liquidity.
• Short-term pain, long-term adjustment: Historically, Indian markets have shown resilience. Many expect developers and buyers to recalibrate within six months, adjusting costs and expectations.

In other words: the storm is real, but it may pass.

What Needs to Be Done

The government now faces a pivotal choice. Its moves in the coming months could decide whether affordable housing remains viable or becomes an early casualty of tariff wars.

Some possible interventions include:

• Trade negotiations: Calming tensions and dialing down tariffs.
• Fiscal cushions: Offering relief to MSMEs through subsidies, tax breaks, or credit support.
• Housing incentives: Reviving schemes like CLSS (Credit Linked Subsidy Scheme) to spur demand.
• Input cost adjustments: Tweaking import duties on construction materials to stabilize project economics.

Without such measures, the affordability crisis could deepen.

Beyond Housing: An Economic Stability Story

At its core, this isn’t just about buildings and mortgages. It’s about the fragility of economic ecosystems.

Affordable housing is often called the “heartbeat” of India’s real estate sector. When it thrives, it uplifts millions of households, fuels urban growth, and drives allied industries. When it struggles, the ripple effects extend far and wide.

Trade wars may seem like geopolitical chess moves. But in reality, they decide whether a young couple in Jaipur can move from a rented room to their first home, or whether a textile worker in Coimbatore can ever afford a place of her own.

Final Thoughts

The US tariffs on Indian exports are more than an economic headline — they’re a stress test for India’s social fabric.

Affordable housing, already weakened by the pandemic, now faces another existential challenge. MSMEs, once India’s success story, are suddenly its vulnerability. And millions of aspiring homeowners are caught in the middle.

Whether this storm passes quickly or leaves lasting scars depends on how fast policymakers, developers, and financial institutions act.

Because in the end, a home is never just a roof and four walls. It’s dignity, stability, and hope. And that’s something India cannot afford to lose.