India's Housing Market Poised for Growth with Improved Affordability by 2025
JLL predicts that India's residential real estate market will see improved affordability by 2025, driven by expected RBI interest rate cuts and stable conditions.
Housing MarketReal EstateRbiAffordabilityResidential SalesReal Estate NewsDec 03, 2024
JLL's Home Purchase Affordability Index (HPAI) indicates that the expected repo rate reductions in the coming months could enhance affordability in most housing markets by 2025, with the exception of Delhi NCR and Bengaluru. Kolkata is projected to remain the most affordable market, potentially reaching new affordability peaks. Cities like Mumbai and Pune, on the other hand, are expected to approach optimal affordability levels.
The report forecasts that residential sales will reach between 305,000 and 310,000 units in 2024, with a potential new peak of 340,000 to 350,000 units in 2025. Although 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. According to Dr. Samantak Das, Chief Economist and Head of Research and REIS, India at JLL, the anticipated interest rate cuts, combined with moderate price growth and sustained income increases, will foster an environment conducive to home purchases over the next 12 to 18 months.
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, noted that the combination of healthy income growth, potential interest rate cuts, and moderating price growth would 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.
Overall, 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, these developments are likely to maintain 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 the Home Purchase Affordability Index (HPAI)?
The Home Purchase Affordability Index (HPAI) is a metric used to measure the ease with which homebuyers can afford to purchase a home, taking into account factors such as interest rates, property prices, and income levels.
What does JLL predict about interest rate cuts by the RBI?
JLL predicts a cumulative 50 basis point (bps) reduction in interest rates over time, which is expected to provide relief to homebuyers and improve affordability in the housing market.
Which cities are projected to remain the most affordable?
Kolkata is projected to remain the most affordable market, potentially reaching new affordability peaks, while cities like Mumbai and Pune are expected to approach optimal affordability levels.
What are the expected residential sales figures for 2024 and 2025?
Residential sales are expected to reach between 305,000 and 310,000 units in 2024, with a potential new peak of 340,000 to 350,000 units in 2025.
How will interest rate cuts benefit the housing market?
Interest rate cuts are expected to reduce borrowing costs, benefiting both homebuyers and developers, and fostering an environment conducive to home purchases over the next 12 to 18 months.
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