Average home prices in India are set to rise 7% this year and next, driven by purchases of luxury properties, according to analysts polled by Reuters who said the supply of affordable homes would continue to lag demand.
Barely dented by the Reserve Bank of India's 2-1/2 percentage points of interest rate rises from May 2022 to February 2023, the housing market has powered along with India, Asia's No. 3 economy and the fastest growing amongst major peers.
Home prices rose 4.3% in 2023, the fastest since 2018, according to Reuters calculations based on the RBI's House Price Index.
However, sharp home price rises add to the challenges of weaker segments in the economy that struggle with stagnant wages and poverty.
Poll medians from a Feb. 16- March 1 survey of 13 property market experts showed average home prices in India were forecast to rise 7.0% this year and next, little changed from 6.8% and 7.5% predicted in November.
"We are expecting an uptick in demand for the luxury segment largely due to high-net-worth investors," said Aniket Dani, Director-Research at CRISIL Market Intelligence and Analytics.
"Developers are channelling their focus towards launching more premium projects, contributing to the challenges faced by the affordable segment."
In answer to a question on the gap between demand for affordable homes and the supply of them over the coming 2-3 years, five said it would remain the same, four said widen and two said narrow.
Despite the RBI's efforts to curb inflation with higher rates, a post-pandemic buying frenzy among high-income earners pushed home prices up.
But expectations the central bank will cut interest rates this year should improve affordability.
A majority of strategists, seven of 12, said purchasing affordability for first-time homebuyers over the coming year will improve. Five said it will worsen.
"Interest rates are...likely to drop in 2024, given the RBI has successfully kept inflation levels in check and intends to shift its stance toward supporting growth. This will impact affordability and demand favourably as homebuyers will be eligible for larger loans," said Vivek Rathi, national director of research at Knight Frank India.
The survey predicted home prices in the large urban centres of Mumbai, Delhi and Bengaluru rising 6.0%, 5.0% and 9.0% this year, respectively.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
