India's Soaring Home Prices Push Millions into Costly Rentals
BENGALURU (Reuters) – Home prices in India are forecast to rise faster than anticipated, fueled by demand from affluent buyers, while a shrinking supply of affordable housing is likely to keep many stuck in ever more expensive rentals, a Reuters poll of property experts has found.
The concentration of well-paying jobs in a few major cities and stagnant wages have pushed home ownership out of reach for millions moving to urban areas for work, forcing most would-be buyers to rent. Although Asia's third-largest economy grew 7.8% last quarter, faster than most major peers, experts warn that the gains are increasingly captured by a small segment of the population of 1.4 billion, leaving job seekers on the sidelines.
This inequality is spilling over into the housing market, where premium demand thrives but affordable options lag far behind. India now faces a deficit of about 10 million affordable homes, a gap that Knight Frank projects could triple by 2030. Average home prices, which have more than doubled in the past decade, were forecast to rise 6.3% this year and 7.0% in 2026, after climbing about 4.0% in 2024, according to median estimates from a Reuters survey of 20 property analysts.
The survey, conducted from August 14 to September 12, showed a faster pace than the 6.0% and 5.0% predicted in June. Prices broadly refer to housing in major cities. 'The current problem is that strong macro numbers have not benefited the population at the lower side of the pyramid, and they are at a disadvantage,' said Ajay Sharma, managing director of Valuation Services at Colliers. 'Their disposable incomes have stagnated.'
Such consumers cannot afford to buy homes in urban centers and are increasingly turning to rentals in order to stay near the city core for livelihood or family needs. 'As affordability in both core and suburban areas is on the decline, more people are renting, and as more people rent, rentals have gone up,' Sharma added. Median forecasts predict average urban rents to rise 5% to 8% over the coming year, outpacing consumer inflation.
When asked what would happen to purchasing affordability for first-time home buyers, analysts were nearly split, with 10 of 19 expecting affordability to improve over the coming year and nine expecting it to worsen. This is a sharp reversal from the June poll, when most expected it to improve. Monetary policy easing has done little to help. The Reserve Bank of India has cut its key interest rate by 100 basis points to 5.50% this year, but experts say this is unlikely to improve affordability.
Avneesh Sood, director at Delhi-based Eros Group, said recent rate cuts may ease mortgage payments slightly, but home prices are rising 7% to 8% nationally, with sharper increases in markets such as the National Capital Region and Bengaluru. 'With the market leaning heavily toward premium and luxury homes, entry-level buyers are likely to be priced out, even with policies that look good on paper,' Sood added.
Experts say the shift has long-term consequences. Only a small fraction of the population is actively engaged in the property market, according to Pankaj Kapoor of Liases Foras. 'Post-financialisation in real estate, we have not improved affordability; we have worsened it to the point where the qualifying age to purchase a property has risen from around 30 to 40 years to 45 years old,' he said. 'Crony capitalism starts with land ownership. So how can cities, where the rich control the land, create affordable housing? That's why housing doesn't give you choices – it gives you frustrated options.'
