India has been a pleasant surprise in terms of growth amid ongoing geo-political tensions that continue to affect some of the world’s largest economies.
Significantly impacted by the instance activity in its construction sector and the housing market, India showed 7.6% growth in the period between July and September 2023, official data show. Dealing with wild swings in energy prices and dramatically high-interest rates, western economies on the other hand paint quite a contrast.
The fact that India is currently one of the fastest-growing economies in the world is directly impacted by growth in India’s second-largest employment-generating sector. According to global property brokerage firm Knight Frank, housing sales in India’s 8 prime residential markets hit a six-year high in the September quarter by clocking a 12% year-on-year increase.
The unprecedented levels of demand in the sector are being further fueled by expectations of the country’s apex banks maintaining a status quo on policy rates. After a 250-basis-point hike in its prime lending rate in February 2023, the Reserve Bank of India (RBI) has maintained it at 6.50% since. Supported by official data that indicate higher-than-previously-forecast growth numbers, the banking regulator is likely to maintain a status quo on the repo in its upcoming policy in December as well── a move that would further boost demand for housing in a country where the housing shortage is estimated to stand at 38 million by 2023.
Intensifying the housing demand in the country are record high levels of migration towards urban areas and a rise in income levels of white-collar individuals in the country’s big cities.
According to the Report Migration in India, 2020-21, based on the Periodic Labour Force Survey (PLFS) 2020-21, the total migration rate in India was 28.9%. In rural India, it stood at 26.5%, data released by the Ministry of Statistics and Programme Implementation show. Out of the total migrant persons, around 10.8% migrated due to employment-related reasons. In March 2023, EY forecast average salary hikes in India at 10.2% in 2023.
In light of these facts, a price increase in the sector is only natural. According to a Reuters poll, house prices in India will increase faster than the consumer price index-based inflation in 2024.
According to the poll conducted in 12 cities between November 16 and 30, 2023, average home prices are forecast to rise 6.8% this year and next.
“If realised, home price inflation will outstrip the increase in consumer prices for the first time in five years. Retail inflation was forecast to average 5.4% and 4.8% this fiscal year and next in a separate Reuters survey,” it said.
The poll predicts property prices in Mumbai, Delhi and Bangalore to rise by 6.0%, 7.0% and 7.0%, respectively, in 2024. If data are any indication, positive price movement is the writing on the wall.
Unlike the rickety pattern witnessed earlier when affordable housing was the mainstay, demand is now led by India’s affluent homebuyers, who are much less vulnerable to fluctuations.
“Homebuyers in the affordable segment were most exposed to the income uncertainties brought by the pandemic and are still recovering from its aftermath, unlike their more affluent counterparts who are fueling the ongoing uptrend in sales,” Knight Frank director of research Vivek Rathi was quoted by Reuters as saying.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
sunita.mishra@proptiger.com
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