Indian home prices poised for 7pc growth amid luxury property surge: Survey

Home prices in India are anticipated to see a steady ascent of 7 per cent this year and the next, propelled chiefly by the boost in purchases of luxury properties, according to a recent survey conducted by Reuters.

Analysts participating in the poll highlights the persistent gap between the demand for affordable housing and its supply, a challenge expected to persist in the coming years.

Regardless of a series of interest rate hikes by the Reserve Bank of India between May 2022 and February 2023, the housing market has continued its strong growth, buoyed by the resilience of Asia's third-largest economy.

Add WION as a Preferred Source

The housing market in India exhibited notable resilience in 2023, with home prices witnessing a 4.3 per cent rise, marking the fastest growth since 2018.

This growth trajectory has largely remained unaffected by the successive interest rate hikes imposed by the Reserve Bank of India.

However, while this surge in home prices denotes a flourishing market, it also exacerbates the challenges faced by economically weaker segments grappling with stagnant wages and poverty.

Aniket Dani, Director-Research at CRISIL Market Intelligence and Analytics, highlighted the emergence of an uptick in demand for luxury properties, primarily driven by high-net-worth investors.

Developers are increasingly directing their efforts towards launching premium projects, thereby intensifying the hurdles encountered by the affordable housing segment.

Addressing concerns regarding the disparity between demand and supply in the affordable housing sector over the next 2-3 years, opinions among experts remain divided.

While some anticipate the gap to remain unchanged, others foresee a widening gap, underscoring the persistent challenges faced by this segment.

Despite the efforts of the Reserve Bank of India to curb inflation through interest rate hikes, a post-pandemic surge in home purchases among high-income earners has propelled home prices upwards.

However, expectations of potential interest rate cuts in the upcoming year are anticipated to enhance affordability, potentially benefiting first-time homebuyers.

Vivek Rathi, national director of research at Knight Frank India, stressed on the potential impact of interest rate adjustments on affordability and demand dynamics.

The survey forecasts a discernible rise in home prices across major urban centers such as Mumbai, Delhi, and Bengaluru, with respective increments of 6.0 per cent, 5.0 per cent, and 9.0 per cent projected for the current year.

These projections draws attention on the evolving landscape of India's real estate market, characterised by varying dynamics across different regions.

(With inputs from Reuters)