A recent Reuters survey predicts that home prices in India will rise steadily by 7% this year and the following year, driven primarily by an increase in the purchase of luxury real estate.
Key Points:
Market Growth: The housing market has maintained robust growth despite multiple interest rate hikes by the Reserve Bank of India between May 2022 and February 2023, due to the resilience of Asia’s third-largest economy.
Affordable Housing Gap: Analysts point out a continuing discrepancy between the supply and demand of affordable housing, a problem that is likely to persist in the coming years.
2023 Performance: In 2023, the Indian housing market demonstrated remarkable resilience with a 4.3 percent increase in home prices, the highest since 2018.
Luxury Real Estate: Aniket Dani, Director of Research at CRISIL Market Intelligence and Analytics, attributes the recent spike in luxury real estate demand to high-net-worth individuals.
Impact on Lower Socioeconomic Groups: While rising housing costs indicate a thriving market, they also exacerbate poverty and stagnant wages for those in lower socioeconomic groups.
Future Prospects: Prospects for interest rate reductions in the coming year are expected to improve affordability, potentially aiding first-time homebuyers.
Regional Dynamics: The survey predicts a noticeable increase in house prices in major cities like Bengaluru (5.0 percent), Delhi (6.0 percent), and Mumbai (9.0 percent) for this year, highlighting the varying dynamics of India’s real estate market across different regions.
Expert Opinions:
Vivek Rathi, National Director of Research at Knight Frank India, emphasized the possible effects of interest rate changes on demand dynamics and affordability. Experts disagree on whether the gap between supply and demand in the affordable housing market will narrow or widen over the next two to three years, underscoring its persistent challenges.
The post-pandemic spike in high-income earners buying homes has driven prices up despite the Reserve Bank of India’s efforts to control inflation through interest rate increases.
However, prospects for interest rate reductions in the coming year are expected to improve affordability, which might help first-time homebuyers.