India’s housing market likely to remain resilient

An aerial view shows residential and commercial building in Kolkata, India, November 14, 2022. REUTERS/Altaf Hussain

BENGALURU: India’s house prices will rise steadily in the next few years, roughly in line with overall economic growth, with low chances of a significant slowdown over the coming year, according to property experts in a Reuters poll.

The findings of the poll highlight how the housing market, one of the biggest employers in a country of around 1.4 billion people, is likely to remain a stable contributor to growth in Asia’s third-largest economy going forward.

Average house prices in India are expected to rise 5% over each of the next three years, lagging the current consumer price inflation rate, after increasing by 7% in 2022, according to the Nov 9 to Dec 1 poll of 11 property market experts.

Forecasts for 2023 ranged widely from 1% to 13%.

But the outlook for India was relatively stable compared with key housing markets in developed economies, where prices are mostly predicted to slump after a pandemic-driven boom as central banks raise rates aggressively.

“The growth trajectory is definitely poised towards the upside,” said Rohan Sharma, senior director at JLL Research.

“However, the expectations of rising interest rates, which may act as a momentary disruptor to demand, may see developers easing up on price increases in 2023,”

The Reserve Bank of India has also raised its repo rate, now at 5.90%, several times this year since May, by 190 basis points in total, with a few more hikes likely before a pause.

Relatively modest interest rate risks partly explain why all but one of 10 analysts who answered an additional question said the chances of a significant slowdown in the housing market over the coming year were low.

A regional breakdown of the latest Reuters poll data showed prices in Bengaluru, Mumbai, Delhi and Chennai were also forecast to rise by a median of 5% to 6% over the coming three years, in line with the national average.

A steady rise in house prices, which has nearly doubled over the last decade, has harmed affordability, dimming the hopes of many aspiring first-time buyers.

House prices in India would need to fall by a median of just 6.25% from peak to trough to make them affordable, according to the median response to an additional question in the Reuters poll, with the highest estimate at 17.5%.

Nine of 11 respondents said either an economic slowdown or rising rates would be the biggest challenge for first-time homebuyers.

“While India has been quite resilient amidst global disturbances, the chances of a slowdown in India cannot be ruled out,” said Anuj Puri, chairman of Anarock Property Consultants.

“If jobs are impacted, the apportionment towards real estate purchases could potentially decline.” — Reuters

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