Pace of price growth for housing properties expected to moderate next year

Potential homebuyers must ensure they don't overstretch themselves financially

Housing prices rose at a brisk pace in 2024. While the market may remain resilient, the pace of price growth is expected to moderate in 2025, possibly providing relief to prospective homebuyers. Amid high and rising prices, buyers need to assess their financial preparedness before making this substantial financial commitment. 

 

Rapid price rise 

 

Residential property prices increased by 5-10 per cent across most markets over the past year. “Certain markets in North India, such as Delhi-NCR and Chandigarh, saw price increases exceeding 14-15 per cent,” says Pankaj Kapoor, managing director, Liases Foras. 

 

In specific segments of some markets, the increase was sharper. “Cities like Bengaluru and Delhi-NCR saw price increases of up to 26 per cent year-on-year (Y-o-Y) in spacious dwelling units, particularly 3-4 BHKs, in the third quarter of 2024,” says Vimal Nadar, senior director and head of research, Colliers India. 

 

One reason for the robust price increase was that demand remained high while supply was constrained as the general elections caused delays in approvals. 

 

While new launches in the affordable housing segment moderated, supply in the luxury and ultra-luxury segments saw a notable increase. “As a result, buyers spent more on a per square foot basis,” says Nadar. 

 

Other experts also emphasise that the premium segment was a key driver of the housing market. “Residential units priced above Rs 1 crore drove market volumes. The sub-Rs 1 crore segment did not see a similar pickup,” says Vivek Rathi, national director of research, Knight Frank India. 

 

Anuj Puri, chairman, Anarock Group, attributes the price increases to rising construction costs coupled with higher demand. 

 

However, experts believe that price growth is likely to moderate, especially in North India. “In the Delhi-NCR market, we expect moderation in price growth as new supply comes in,” says Kapoor. 

 

Puri, too, is of the view that new launches, which were delayed due to elections, will increase in 2025 and lead to stabilisation in average prices. 

 

Positive drivers for 2025 

 

Interest rate cuts could have a positive impact on demand in 2025. “However, remember that changes in the repo rate have an impact with a lag,” says Nadar. 

 

Strong rental demand is expected to be another driver. “If interest rates decline but rental yields stay strong, expect further appreciation in capital values,” says Kapoor. 

 

Infrastructure improvements could also lead to price spurts in select areas. “Many areas which were earlier difficult to access are now becoming well connected. In Mumbai, better connectivity has made many locations more attractive,” says Kapoor. 

 

Growing demand for lifestyle-oriented homes, stable income growth, and nuclearisation of families are other trends that will support property prices, according to Rathi. He highlights that the Real Estate Regulatory Authority (RERA) has made property developers more accountable and boosted consumer confidence. 

 

The state of the economy will also play a key part. “If the economy remains robust, with geopolitical tensions and other global uncertainties not having a significant impact, then property demand will remain high,” says Puri. 

 

Factors that could impede price rise 

 

A steep price rise may deter homebuyers. “More of them could postpone purchases,” says Puri. Speculative excesses could also hurt demand. “If builders become overly greedy and start driving prices too high through speculation, that could become an issue,” cautions Kapoor. 

 

Buy now or wait? 

 

For end-users, waiting may not serve much purpose. The real estate bull run shows no sign of ending. If prices continue to rise, buyers may end up purchasing at a higher price. “Those who have the financial wherewithal and are buying for self-use should take the plunge,” says Puri. 

 

Rental yield can be a good barometer of whether the price is attractive. “If the yield is above 3–3.5 per cent, the property is likely to appreciate in value,” says Kapoor. 

 

Are you ready financially? 

 

Potential buyers need to ensure they have adequate resources to deal with current property prices. “Start by assessing your financial goals. Buying a house might seem like an urgent goal, but it is rarely the only one,” says Vishal Dhawan, founder and chief executive officer (CEO), Plan Ahead Wealth Advisors. In other words, house purchase should not happen at the expense of other goals. 

 

A key check buyers need to run is whether they can manage the EMI burden, especially in the current environment where loan rates are on the higher side. “Even in dual-income households, EMIs should be planned taking only one income into consideration. This ensures that if the second income becomes temporarily unavailable, say, due to job changes, starting a family, or some other reason, you do not feel overwhelmed,” says Dhawan. 

 

Buyers should also take into account the full cost of home ownership. “In addition to the price of the property, there are several other costs – stamp duty and registration fees, ongoing maintenance, and so on. Many buyers spend heavily on renovation, which significantly increases cost,” says Dhawan.   Prices have surged 11% on average across cities 

City	Average Price Q3 2024	YoY Price change (Q3 2024 vs Q3 2023)
Ahmedabad	7,640	16%
Bengaluru	11,743	24%
Chennai	7,889	2%
Delhi NCR*	11,438	32%
Hyderabad	11,351	3%
Kolkata	7,616	3%
MMR*	20,438	4%
Pune	9,890	10%
Pan India	11,000	11%

 

Source: Liases Foras, Colliers

All the prices are based on carpet area

*NCR- National Capital Region | **MMR- Mumbai Metropolitan Region

  (The write is a Mumbai-based independent financial journalist)