India’s home prices expected to increase by 7% over the next two years; here’s what experts have to say | India Business News – Times of India
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Despite the Reserve Bank of India‘s efforts to curb inflation by raising interest rates by 2.5 percentage points from May 2022 to February 2023, the housing market in India has remained robust, fueled by its status as Asia’s third-largest economy, with the fastest growth among its major peers.
In 2023, home prices saw a notable increase of 4.3%, the highest growth rate since 2018, according to calculations based on the RBI’s House Price Index quoted in the survey report. However, the sharp increases in home prices worsen the difficulties faced by economically vulnerable groups dealing with stagnant wages and poverty.
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According to a recent survey conducted from February 16 to March 1 involving 13 property market experts, the median forecast predicts a 7.0% increase in average home prices for both this year and the next. This forecast remains largely unchanged from the predictions of 6.8% and 7.5% made in November.
Aniket Dani, Director-Research at CRISIL Market Intelligence and Analytics, attributes the expected rise in demand for luxury properties to high-net-worth investors. He notes that developers are concentrating on launching more premium projects, exacerbating the challenges faced by the affordable housing segment.
Regarding the gap between demand and supply of affordable homes over the next 2-3 years, opinions vary among experts. While five experts believe the gap will remain the same, four anticipate it widening, and two expect it to narrow.
Even though the RBI raised rates to control inflation, a surge in home buying by wealthy individuals after the pandemic led to higher prices. However, the expectation that the central bank will lower interest rates this year should make homes more affordable.
Most strategists, eight out of 12, believe that affordability for first-time homebuyers will improve in the upcoming year. However, four experts expressed the opinion that it will worsen.
According to Vivek Rathi, National Director of Research at Knight Frank India, interest rates are likely to decrease in 2024, as the RBI aims to support economic growth. This move is expected to positively impact affordability and demand, as homebuyers will become eligible for larger loans.
The survey also predicts varying increases in home prices in major urban centers such as Mumbai, Delhi, and Bengaluru, with rises of 6.0%, 5.0%, and 9.0%, respectively, anticipated for this year.