What's driving up housing prices in India?
₹40 lakh) in new supplies has been shrinking in the top seven cities, from 24% in Q3 2021 to 18% in Q3 2023, according to Anarock, a property consulting firm. In Q3 2019, this segment accounted for 41%. This drop is driven by several factors, including higher land value and construction costs.
A government boost is seen as essential to reverse this decline. An Ipsos survey last year found that 65% of urban Indians who do not own homes fear they may never be able to afford one. Real estate prices vary from city to city, depending on local factors, including new supply, absorption and rentals.
However, high interest rates could moderate housing price inflation. In the top seven cities, house price increases in Q3 2023 ranged from 1% to 19%, with Hyderabad (19%) and Bengaluru (18%) leading, as per the Housing Price Tracker by CREDAI, Liases Foras, and Colliers. These two cities also saw big jumps in rentals last year, coinciding with the return-to-office mandate imposed by several IT companies.
According to Anarock, rentals in India's top cities went up by over 30% in the first nine months of 2023. This partly increased the demand for house ownership, from those who wanted to escape the huge jumps in rentals. This, in turn, pushed house prices up.
Housing prices in the Mumbai Metropolitan Region (MMR) increased only by 1%, in part because its average base price per square foot of ₹19,585 is the highest among Indian cities. Within MMR, Navi Mumbai saw a year-on-year increase of 11%. When the pandemic hit, many builders were saddled with large unsold inventories.
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