[boldive]

Here is a very low cost 400 ppr encoder that might be suitable for this project.
Encoder 400P R Incremental Rotary Encoder AB 2 Phase 6mm Shaft 5V 24V W Coupling | eBay

It looks like the shipping cost can change the story.

There are few available encoders for reasonable price:
non-contact, magnetic AMS AS5040-ASSU
or something like CUI INC AMT312Q-V

Magnetic is very cheap and has high resolution.