India's Housing Market Set for Growth as Affordability Improves by 2025
Hyderabad and Bengaluru lead in price growth since 2011, while Mumbai tops in income growth. Real estate experts predict increased affordability and strong market performance due to potential interest rate cuts and steady income growth.
India Real EstateHousing MarketAffordabilityInterest RatesJllReal Estate MumbaiDec 03, 2024
JLL's Home Purchase Affordability Index (HPAI) indicates that the anticipated 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, with the potential to reach new affordability peaks. Cities like Mumbai and Pune are expected to approach optimal affordability levels.
Residential sales are forecasted to reach between 305,000 and 310,000 units in 2024, with further growth expected in 2025, potentially reaching a new peak of 340,000 to 350,000 units. Although a rate cut before the end of 2024 is 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, noted that 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. He added that affordability levels across all cities are expected to improve to their best levels since 2022, which will maintain buoyancy in 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 with 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.
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 the Home Purchase Affordability Index (HPAI)?
The Home Purchase Affordability Index (HPAI) is a metric used to assess the affordability of purchasing a home in a given market. It takes into account factors such as interest rates, property prices, and income levels to provide a comprehensive view of housing affordability.
Which cities are projected to see the most improvement in housing affordability?
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 is the expected impact of the anticipated interest rate cuts on the housing market?
The anticipated interest rate cuts by the Reserve Bank of India (RBI) are expected to reduce borrowing costs, thereby improving affordability for homebuyers and benefiting both homebuyers and developers.
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 expected in 2025, potentially reaching a new peak of 340,000 to 350,000 units.
What are the key factors contributing to improved housing affordability in India?
The key factors contributing to improved housing affordability in India include potential interest rate cuts, healthy income growth, and moderating property prices.
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