India’s housing market remains upbeat, amidst strong demand, increasing residential construction activity, as well as robust economic growth.
The All-India house price index rose by 4.56% in Q1 2023 from a year earlier, following y-o-y increases of 2.79% in Q4 2022, 4.52% in Q3, 3.45% in Q2, and 1.8% in Q1, according to figures released by The National Housing Bank (NHB), the country’s central bank. However, when adjusted for inflation, nationwide house prices actually dropped 1.42%.
India’s house price annual change
On a quarterly basis, house prices increased slightly by 0.63% (0.22% inflation-adjusted) in Q1 2023.
Bangalore witnessed the biggest y-o-y price increase of 16.3% (9.65% inflation-adjusted) during the year to Q1 2023, followed by Kochi (8.46%) and Delhi (6.65%). More modest house price growth was registered in Lucknow (4.54%), Mumbai (4.27%), Kanpur (3.95%), Ahmedabad (2.47%), and Chennai (1.3%). In contrast, house prices declined in Jaipur and Kolkata, by 8.5% and 8.15%, respectively.
Demand remains healthy, amidst rapid population growth and increasing purchasing power of the people. In Q2 2023, home sales in India’s 8 major markets rose by 8% to 80,250 units compared to 74,320 units sold in Q2 2022, according to PropTiger. In the first half of 2023, the total number of houses sold in major cities reached 166,100 units, up by 14.6% from the same period last year.
India’s population is projected to reach 1.43 billion people this year, surpassing China as the world’s most populous country. GDP per capita rose to US$2,379 in 2022, sharply up by 66% from a decade ago, based on figures from the International Monetary Fund (IMF).
Residential construction activity is also rising. In the second quarter of 2023, there were 113,770 new housing units launched in the country’s eight major cities, up by 11% from 102,140 new launches a year earlier, according to PropTiger. New launches rose in 5 out of the 8 major Indian cities during the year to Q2 2023, led by Chennai, Ahmedabad, and Pune.
In the first half of 2023, new launches reached 261,560 units, sharply up by 44% from the same period last year.
India’s housing market is expected to continue growing in the coming months. “Despite both an appreciation in prices and a rise in mortgage rates, housing demand has remained strong. We strongly believe that the housing market is in the midst of a cyclical upturn,” Wadhawan added.
India’s economy expanded by a healthy 6.8% during 2022, following strong growth of 9.1% in 2021 and a pandemic-induced contraction of 5.8% in 2020. The economy continued to grow this year, registering a real GDP growth rate of 6.1% in Q1 2023 from a year earlier, following year-on-year growth of 4.5% in Q4 2022, 6.2% in Q3, 13.1% in Q2 and 4% in Q1, based on figures from the Ministry of Statistics and Programme Implementation (MOSPI). The continued economic expansion was primarily buoyed by strong private consumption, services exports, and manufacturing.
The Indian economy is expected to grow by another 6.5% for FY 2023-24. This is in line with the Asian Development Bank (ADB)’s growth forecast for India of 6.4% this year and 6.7% next year.
House price variations
The latest housing market data from PropTiger paint the same picture: India’s house prices continue to increase due to a surge in demand. Nationwide, the average house price stood at INR 7,100 (US$86) per square meter (sqm) in Q2 2023, up by 6% from a year earlier.
By major city (based on PropTiger figures):
- Mumbai had the most expensive housing in India, with house prices reaching an average of INR 10,200 (US$123) per sqm in Q2 2023, up by 3% from a year ago.
- In Ahmedabad, house prices rose by 7% y-o-y to an average of INR 3,800 (US$46) per sqm.
- In Bangalore, prices increased by 9% y-o-y to an average of INR 6,400 (US$77) per sqm.
- In Chennai, the average house price was up modestly by 3% to INR 5,900 (US$71) per sqm.
- Delhi NCR saw a house price growth of 6% y-o-y in Q2 2023, to an average of INR 4,900 (US$59) per sqm.
- In Gurugram, house prices increased strongly by 12% y-o-y to an average of INR 7,100 (US$86) per sqm.
- In Noida, the average price rose by 8% y-o-y to INR 5,700 (US$69) per sqm.
- Hyderabad registered an increase in house prices of 5% to INR 6,500 (US$79) per sqm in Q2 2023 from a year earlier.
- In Kolkata, house prices rose by 6% y-o-y to an average of INR 4,700 (US$57) per sqm.
- In Pune, prices increased by a modest 3% y-o-y to an average of INR 5,700 (US$69) per sqm.
Demand remains robust
In Q2 2023, home sales in India’s 8 major markets rose by 8% to 80,250 units compared to 74,320 units sold in Q2 2022. However, on a quarterly basis, sales dropped 7% during the latest quarter.
Yet India’s 8 major cities registered huge variations in home sales:
- In Ahmedabad, sales of residential properties rose strongly by 17% y-o-y to 8,450 units in Q2 2023
- In Mumbai, home sales increased 16% y-o-y to 30,260 units
- In Pune, sales surged by 37% y-o-y to 18,850 units
- In Bangalore, on the other hand, sales registered a decline of 19% y-o-y to 6,790 units
- In Chennai, sales fell by 5% to 3,050 units from a year earlier
- In Delhi NCR, total sales dropped by a huge 28% to only 3,230 units
- In Hyderabad, sales fell slightly by 3% y-o-y to 7,680 units
- In Kolkata, sales plummeted by 40% y-o-y to just 1,940 units
In the first half of 2023, the total number of houses sold reached 166,100 units, up by 14.6% from the same period last year.
“India’s top eight residential markets continue on a growth path with sales rising by 8% in the June quarter. The RBI’s decision to pause the hike in the key lending rate helped in sustaining strong positive sentiments for buying residential properties,” said Vikas Wadhawan, group CFO of REA India & Business Head of PropTiger.com.
“The driving factors behind the uptick in housing sales over the last two years are pent-up demand from the COVID-affected period, growing appetite for homeownership, revival in the economy post-pandemic, and the evolving need for more spacious homes. We anticipate that the upward trend will persist, making the 2023 calendar year even better than the previous year in terms of sales performance,” Wadhawan added.
Mumbai and Pune are India’s two biggest markets, accounting for about 61% of total sales in the country’s top 8 cities in Q2 2023.
Foreign homeownership rules
While domestic demand remains the main driver of housing market growth in India, foreign homebuyers are also increasing.
A foreign national resident in India does not require the approval of the RBI to purchase immovable property in India. Once he is a resident in India, he gets rights like any other resident. This freedom is however not available to citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, or Bhutan. However, a foreign national of non-Indian origin resident outside India cannot buy any immovable property in India. It is illegal for foreign nationals to own property in India unless they satisfy the residency requirement of 183 days in a financial year (a tourist visa lasts for 180 days). It is also illegal to buy property on a tourist visa.
Moreover, property cannot be purchased jointly in the name of one eligible person with one non-eligible person. That means a non-resident Indian (NRI) or foreign national of Indian origin (PIO) cannot buy a property jointly with a foreigner.
Residential construction activity continues to increase
In the second quarter of 2023, there were 113,770 new housing units launched in the country’s eight major cities, up by 11% from 102,140 new launches a year earlier, according to PropTiger. However, on a quarterly basis, new launches declined by 23% in Q2 2023.
New launches rose in 5 out of the 8 major Indian cities during the year to Q2 2023:
- Chennai saw the biggest y-o-y increase in new launches, surging by about 154% to 4,640 units in Q2 2023 from 1,830 units in Q2 2022.
- In Ahmedabad, the number of launches soared 126% y-o-y to 21,500 units over the same period.
- In Pune, new launches almost doubled to 26,610 units in Q2 2023 from a year earlier.
- Kolkata also recorded a huge increase in the number of new housing units launched, rising by 75% y-o-y to 3,510 units in Q2 2023.
- In Delhi NCR, launches rose by 43% y-o-y to 4,240 units in Q2 2023.
- In Bangalore, new launches fell by 37% y-o-y to 7,990 units.
- Hyderabad’s new houses launched dropped 27% to 11,950 units in Q2 2023 from a year ago.
- In Mumbai, new launches also dropped 23% to 33,330 units over the same period.
In the first half of 2023, the total number of new housing units launched in the eight major cities reached 261,560 units, sharply up by 44% from the same period last year.
Inventory overhang slowly declining
The total stock of unsold residential properties available in the market is gradually returning to its pre-pandemic level, amidst improved economic activity.
By end-2022, there were 849,510 unsold inventory in India – the lowest level since 2020. Pune, Kolkata, and Chennai have the lowest inventory overhang equivalent to about 26 months. In contrast, Delhi NCR continues to have the highest inventory overhang equivalent to around 61 months of supply.
‘The real estate sector bounced back strongly in 2022, with the resumption of economic activities in full swing. The improvement in sales in 2022 has been instrumental in lowering the inventory burden for India’s real estate developers,” said PropTiger.
“Consequently, inventory overhang --- the estimated time builders would take to sell off the existing unsold stock, based on the current sales velocity--- has now declined to 33 months as compared to 42 months in 2021. The inventory overhang is the lowest since 2020.”