India's Housing Market Poised for Growth as Affordability Improves by 2025
India's residential real estate market is expected to see enhanced affordability levels by 2025, driven by anticipated interest rate cuts from the Reserve Bank of India (RBI). While cities like Kolkata and Pune will remain highly affordable, others such a
Real EstateHousing MarketRbiJllAffordabilityReal Estate PuneDec 03, 2024
The report suggests that a cumulative 50 basis point (bps) reduction in interest rates over time would provide much-needed relief to homebuyers, addressing the affordability issues that have been prevalent since 2022. JLL's Home Purchase Affordability Index (HPAI) indicates that these repo rate reductions could enhance affordability in most housing markets by 2025, with the exception of a few areas like Delhi NCR and Bengaluru.
Kolkata is projected to remain the most affordable market, potentially reaching new affordability peaks. Cities like Mumbai and Pune are also expected to approach optimal affordability levels. This improvement in affordability is expected to boost residential sales, which are forecasted to reach between 305,000 and 310,000 units in 2024. Further growth is anticipated in 2025, with sales potentially reaching a new peak of 340,000 to 350,000 units.
While a rate cut before the end of 2024 remains uncertain, experts anticipate a 50 bps reduction within the next 12 months. This easing of monetary policy is expected to reduce borrowing costs, benefiting both homebuyers and developers. The report further reveals that while affordability in Delhi NCR and southern cities like Bengaluru, Hyderabad, and Chennai is expected to improve on a year-on-year basis, these markets will still remain below their peak affordability levels.
Dr. Samantak Das, Chief Economist and Head of Research and REIS, India at JLL, explains that the combination of anticipated interest rate cuts, moderate price growth, and sustained income increases will create an environment conducive to home purchases over the next 12 to 18 months. He adds that affordability levels across all cities are expected to improve to their best since 2022, which will maintain a buoyant homebuyer behavior and ensure long-term market resilience.
In terms of price growth since 2011, Hyderabad leads with a 132% increase, followed by Bengaluru with 116% and Delhi NCR at 98%. On the income front, Mumbai has seen the highest growth at 189%, with Pune and Hyderabad following at 173% and 163%, respectively.
Siva Krishnan, Senior Managing Director (Chennai & Coimbatore) and Head of Residential Services, India at JLL, notes that the combination of healthy income growth, potential interest rate cuts, and moderating price growth will improve affordability over the next 12 months. This is expected to sustain market activity and support strong performance in India's residential real estate sector in the medium term.
The anticipated interest rate cuts by the RBI, alongside healthy income growth and moderating property prices, are expected to significantly improve affordability in India's residential real estate market. While some cities like Kolkata and Pune will see better affordability levels, others, such as Delhi NCR and Bengaluru, may still lag behind their peak affordability levels. However, overall, these developments are likely to sustain the growth momentum in the residential market, providing a more favorable environment for homebuyers in the near future. This combination of factors ensures continued strong performance in the sector, benefiting both homebuyers and developers.
Frequently Asked Questions
What is driving the expected improvement in India's housing market affordability?
The anticipated interest rate cuts by the Reserve Bank of India (RBI), combined with moderate price growth and sustained income increases, are expected to drive the improvement in affordability.
Which cities are expected to see the best improvement in housing affordability?
Kolkata and Pune are projected to see the best improvement in housing affordability, with Kolkata potentially reaching new affordability peaks.
How many residential units are expected to be sold in 2024 and 2025?
Residential sales are expected to reach between 305,000 and 310,000 units in 2024, with further growth in 2025, potentially reaching a new peak of 340,000 to 350,000 units.
What factors are contributing to the expected increase in residential sales?
The combination of anticipated interest rate cuts, healthy income growth, and moderating price growth is expected to boost residential sales and improve affordability.
Which cities are expected to remain below their peak affordability levels?
Delhi NCR and Bengaluru are expected to remain below their peak affordability levels, despite year-on-year improvements.
Related News Articles
Ambarish Jethwani: UAE's Real Estate Icon CEO of the Year
Ambarish Jethwani, the visionary leader of Gems of India, has been honored as the Best CEO Real Estate Icon UAE at a prestigious industry event. This recognition highlights his significant contributions to the real estate sector in the UAE.
Prestige Estates Launches QIP to Raise Up to Rs 5,000 Crore
Bengaluru-based Prestige Estates is one of the leading developers in the country, with a significant presence in the South India market.
Ashwinder R Singh: A Trailblazer in Indian Real Estate
From banking to real estate, Ashwinder R Singh's journey is a testament to his visionary leadership and relentless pursuit of excellence in the industry.
Transforming Hinjewadi Pune: The Epicenter of Urban Living
Hinjewadi Pune's real estate market is booming, with property values expected to soar as infrastructure and amenities continue to improve.
Supreme Court's Builder-Bank Ruling Receives Acclaim from Real Estate Sector
The real estate sector has welcomed the Supreme Court's recent order on the builder-bank nexus, which is expected to protect homebuyers and restore trust in the housing market. Industry experts believe this move will bring transparency and accountability, ultimately benefiting both developers and consumers.
Shubham Bibave: The World's Eyes on India, and My Clients Are Ready for It
The real estate market in India is witnessing a transformation, and Shubham Bibave is at the forefront of this change. His real estate division is laying the groundwork for a brighter, bolder future in Pune.