Home prices in India to rise 6.5% in 2025 due to demand from wealthy: Poll

Average home prices in India are set to rise steadily over the coming years driven mainly by demand from wealthy individuals, while the rising cost of living will make owning a property unattainable for most people, a Reuters poll found.

 

While India's middle class tightens its belt, cutting back on everything from tea to two-wheelers due to soaring consumer inflation, the richest 1 per cent who own 40 per cent of the country's wealth are snapping up homes in cities with well-paying jobs.

 

Though that is enough to sustain price rises in the short-term, property analysts say there are limits to how much the rich can keep demand alive in an economy which is already slowing down.

 

 

After rising 4.3 per cent last year, home prices in India - broadly referring to housing in major cities - were expected to rise 7.0 per cent this year, 6.5 per cent in 2025 and 7.5 per cent in 2026, median forecasts from the Nov. 12-29 survey of 12 property market experts showed.

 

That outlook is largely unchanged from the September poll.

 

"The segment which is driving all this price increase is the luxury segment. And this will continue for some more time, but the entire narrative we all are seeing is very rosy," said Ajay Sharma, managing director of Valuation Services at Colliers International.

 

But Sharma said there are clear signs that most people are struggling with the cost of living.

 

"Nobody is talking about structural issues in the demand. Once the top cream stops buying, you will have a massive fall in sales."

 

In the meantime, rents are expected to rise even faster than house prices, by 7.5 per cent to 10 per cent over the coming year, according to the median range given by 11 property experts.

 

"The stress on housing affordability will pressure more people to opt for renting, pushing the demand up in this segment," said Sunita Mishra, research lead at Housing.com and PropTiger.com

 

With property developers focusing on the luxury market, the shortage of affordable homes continues to sideline many first-time buyers - particularly those from middle- and lower-income groups.

 

"The fact that most new launches and available new stock in the country's urban centers are in the premium and high-end segment would have a deep impact as well, fuelling upward growth in rents," Mishra added.

 

While not being able to build enough affordable homes is a common problem in most countries, the scale of the challenge is staggering in India, home to the world's largest population of over 1.4 billion people.

 

Asked what would happen to affordability for first-time home buyers over the coming year, eight property experts said it would worsen and only four said it would improve.

 

A substantial decline in interest rates could alleviate some of the pressure on homebuyers, but economists do not expect more than 50 basis points worth of cuts from the Reserve Bank of India, and not likely until early next year.