By Milounee Purohit
An Overview of the Housing Market in India
BENGALURU, March 5 (Reuters) – Average home prices in India are set to rise 7% this year and next, fueled by luxury property purchases, as analysts indicate a persistent gap between the demand for affordable housing and its supply.
Resilient against the backdrop of the Reserve Bank of India’s consecutive interest rate increases since May 2022, the housing sector in Asia’s third-largest economy has outpaced its major counterparts.
Recent Growth Trends and Projections
Home prices in India witnessed a 4.3% spike in 2023, marking the most significant surge since 2018, revealed Reuters calculations based on the RBI’s House Price Index.
While these increases signify a robust market, they pose challenges for economically vulnerable segments grappling with stagnant wages and poverty.
Insights from a poll conducted between Feb. 16 to March 1, involving 13 property market experts, revealed that average home prices are forecasted to grow by 7.0% in the upcoming years, aligning with previous predictions.
“We anticipate heightened demand for luxury properties attributed to high-net-worth investors,” remarked Aniket Dani, Director-Research at CRISIL Market Intelligence and Analytics.
Dani further added, “Developers are increasingly focusing on premium projects, exacerbating the challenges faced by the affordable housing segment.”
Implications for Affordability and Demand
Despite efforts by the RBI to combat inflation through interest rate hikes, a wave of post-pandemic buying frenzy, especially among high-income individuals, propelled home prices upwards.
Anticipated interest rate cuts by the central bank in the current year are expected to enhance affordability.
With a majority of strategists (seven out of 12) projecting improved purchasing affordability for first-time homebuyers in the next year, prospects seem promising in the housing market. In contrast, five experts expressed concerns over a potential worsening scenario.
Highlighting the expected rate cuts, Vivek Rathi, national director of research at Knight Frank India, emphasized, “Interest rates are likely to decline in 2024, creating a favorable impact on affordability and enhancing demand as homebuyers can access more substantial loans.”
Regional Variation in Price Movements
The survey unveiled that home prices in major urban centers like Mumbai, Delhi, and Bengaluru are set to surge by 6.0%, 5.0%, and 9.0%, respectively, in the current year.
Source: Reuters Poll – India housing market outlook – March 2024. Link: https://tmsnrt.rs/431m5TT
(Reporting by Milounee Purohit; Polling by Susobhan Sarkar and Anant Chandak; Editing by Ross Finley and Ros Russell)
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