By Vivek Mishra and Rahul Trivedi
BENGALURU (Reuters) – The outlook for India’s housing market has barely budged in over a year, according to a Reuters poll of property experts who cited cooling demand from wealthy buyers with many expecting unsold luxury inventory to either rise or remain elevated.
Average home prices, which have more than doubled in 11 years, are forecast to rise 6.0% this year and 5.0% next year, after climbing about 4.0% in 2024, according to median estimates from a May 16–June 6 survey of 15 property market analysts.
The poll was taken before the Reserve Bank of India surprised markets on Friday with a 50-basis-point cut in the repo rate to 5.50% to support economic growth.
But the 50-bps easing before the latest move has done little to lower bank lending rates, raising doubts over monetary policy’s ability to revive housing demand.
While the Indian economy grew 7.4% last quarter, outpacing major peers thanks partly to a rebound in rural demand, urban household consumption remained weak. High youth unemployment and stagnant wages in cities, where most jobs are located, continue to weigh on overall domestic demand.
That strain is now starting to show in the housing market as well, where sales have tumbled after years of being driven by cash-rich buyers snapping up prime properties across major cities.
“The demand from the ultra-rich has definitely peaked. You can see that in the sales numbers. That’s not to say demand is dead, there will always be some wealthy folks wanting to park their money in property. But that crazy rush post-COVID is over,” said Pankaj Kapoor, managing director at real estate research firm Liases Foras.
“Demand is clearly slowing and the GDP data backs that. We’ve got to stop making a fairytale out of the headlines – you dig a bit and the cracks are all there,” he said.
“I think it’s time investors wake up, smell the coffee, and realise this slowdown is real and it’s going to spill over into the wider housing market too.”
When asked about affordability for first-time home buyers over the coming year, 12 experts said it would improve, while Colliers International’s Ajay Sharma, Magicbricks’ Prasun Kumar and Savills’ Arvind Nandan said it would worsen.
CBRE’s Anshuman Magazine said recent rate cuts and lower taxes announced in the last government budget “are expected to improve discretionary income…and enhance affordability for first-time buyers in the country.”
Most analysts said there were signs of weakening demand in luxury housing.
Asked what would happen to unsold homes for the wealthy over the next two years, six of 15 respondents said it would rise, five said stay the same and four said decline.
“Supply in the luxury housing segment has grown…, however, demand has increased marginally. This gap suggests unsold inventory in the premium segment is likely to remain high,” said Magicbricks’ Kumar.
Meanwhile, the outlook for affordable housing in India is no brighter. Seven respondents said the supply of new affordable homes would decline, four said stay the same and four said rise.
There is a scarcity of new projects, squeezed by thin developer margins and weak policy support, deepening a divide where homeownership remains out of reach for many millions.
That mismatch between strong demand and limited supply has pushed home prices to levels where tens of millions have no choice but to rent.
Urban rental costs are set to rise even faster – by 5.0% to 9.0% over the coming year, the poll’s median forecast showed – far outpacing the latest consumer inflation rate of 3.16%.
(Other stories from the Q2 Reuters housing market polls)
(Reporting by Vivek Mishra and Rahul Trivedi; Polling by Susobhan Sarkar and Vijayalakshmi Srinivasan; editing by Hari Kishan, Ross Finley and Mark Heinrich)
Comments