India's Housing Market Set for Rapid Growth, Luxury Demand Surges
A recent Reuters poll of property analysts indicates that home prices in India are expected to rise by 6.3% in 2025 and 7% in 2026, driven by strong demand in the luxury segment. However, the supply of affordable housing remains critically low, exacerbating the affordability crisis.
India Real EstateHousing PricesLuxury HousingAffordable HousingRental MarketReal Estate NewsSep 12, 2025
India’s residential property values have more than doubled over the past decade, reflecting steady demand in major urban centres. However, while Asia’s third-largest economy expanded by 7.8% in the last quarter, gains from economic growth are not evenly distributed. Wealthier homebuyers are fueling demand in high-end projects, while middle- and lower-income households are increasingly priced out of ownership and forced into costly rentals.
Analysts noted that India faces an estimated shortfall of around 10 million affordable homes, with consultancy Knight Frank projecting that the deficit could triple by 2030 if current trends persist. Ajay Sharma, Managing Director of Valuation Services at Colliers, observed that macroeconomic growth has not translated into higher disposable incomes for households at the lower end of the pyramid. This has kept homeownership out of reach for millions, particularly in urban centres, and led to a growing dependence on rental housing.
The poll showed that urban rental rates are expected to rise between 5% and 8% over the next year, outpacing consumer inflation. This shift is being driven by young professionals and families seeking proximity to city centres for work and education, despite limited affordability for ownership. Some experts highlighted that affordability has deteriorated significantly in both city cores and suburban markets. As demand for rental accommodation rises, competition is pushing rents higher, leaving fewer options for first-time home seekers.
The Reserve Bank of India has reduced its key policy rate by 100 basis points this year to 5.50%, aiming to ease borrowing costs. However, analysts said the cuts are unlikely to make a meaningful difference, as the rapid pace of home price appreciation offsets lower interest payments. Avneesh Sood, director at Delhi-based Eros Group, pointed out that while mortgage payments may become marginally more manageable, property prices are climbing 7% to 8% nationally, with sharper increases recorded in the National Capital Region and Bengaluru. This has effectively cancelled out the benefits of lower borrowing rates.
The findings underscore the persistent affordability challenge in India’s housing market. Pankaj Kapoor of Liases Foras remarked that the qualifying age for purchasing a home has increased significantly in recent years, with many buyers now entering the market only after the age of 40. Experts also cautioned that unequal access to land and capital is reinforcing structural imbalances, leaving the majority of aspiring homeowners with limited or delayed entry into property ownership.
With luxury housing driving most of the growth and affordable stock lagging, analysts expect the divergence between high-end demand and mass-market needs to widen further, shaping India’s housing market dynamics in the years ahead.
Frequently Asked Questions
What is the expected growth in home prices in India for 2025 and 2026?
Home prices in India are expected to rise by 6.3% in 2025 and 7% in 2026, according to a Reuters poll of property analysts.
What is driving the increase in home prices in India?
The increase in home prices is primarily driven by strong demand in the premium and luxury segments, while the supply of affordable housing remains constrained.
What is the estimated shortfall in affordable housing in India?
India faces an estimated shortfall of around 10 million affordable homes, with consultancy Knight Frank projecting that the deficit could triple by 2030 if current trends persist.
How are rental rates expected to change in the next year?
Urban rental rates are expected to rise between 5% and 8% over the next year, outpacing consumer inflation and driven by young professionals and families seeking proximity to city centres.
What steps has the Reserve Bank of India taken to address the housing market challenges?
The Reserve Bank of India has reduced its key policy rate by 100 basis points this year to 5.50%, aiming to ease borrowing costs. However, analysts say the cuts are unlikely to make a meaningful difference due to the rapid pace of home price appreciation.
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