With increasing demand (particularly for high-value properties) and a surge in new development, India's housing market continues to grow steadily, bolstered by strong economic fundamentals and relative stability of the interest rates in residential lending.

This extended overview from the Global Property Guide covers key aspects of the Indian housing market and takes a closer look at its most recent developments and long-term trends.

Table of Contents:

• Housing Market Snapshot
• Demand Highlights
• Supply Highlights
• Rental Market
• Mortgage Market
• Socio-Economic Context

Housing Market Snapshot

Preliminary data released by the Reserve Bank of India (RBI) in August 2024 reveals a year-on-year growth of 3.30% (-0.48% inflation-adjusted) in the All-India House Price Index for Q1:2024-25 (ending June 2024). On a quarter-on-quarter basis, the index increased by 1.82%, or 0.95%, when adjusted for inflation.

According to a Reuters survey conducted in May 2024 with 15 property market experts, average home prices are projected to rise by approximately 6% this year and next, slightly lower than the 7% earlier forecasted in a March poll. "Property prices are expected to maintain an upward trajectory," said Ankita Sood, Director and Head of Research at REA India, quoted by Reuters. "The demand for high-value properties from investors and high-income individuals fuels this upward trend."

India's house price annual change in 10 biggest cities:

Residential property prices continue to vary significantly across the country. The April-June 2024 PropIndex report from Magicbricks, India's leading property portal, indicates the highest average prices are in Mumbai at INR 26,780 (USD 321) per square foot, followed by Delhi at INR 17,229 (USD 207), and Gurugram at INR 12,689 (USD 152). On the more affordable end, Ahmedabad (INR 5,738/USD 69 per square foot), Kolkata (INR 6,644/USD 80 per square foot), and Greater Noida (INR 6,735/USD 81 per square foot) offer the lowest average prices.

Average residential property price per square foot, by city:

The observed upward trend for housing prices is largely determined by strong demand reflected in a 10.6% year-on-year growth in residential sales across eight major markets reported by Knight Frank for H1 2024. Out of more than 173,000 sales, the largest share was concluded in Mumbai (27%), followed by the National Capital Region (17%) and Bengaluru (16%). Residential units priced above INR 10 million (USD 119,900) experienced a 51% year-on-year growth and accounted for 41% of total sales in major markets, indicating a shift in demand towards higher-priced, premium properties.

Capitalizing on the growing demand, development activity in India's residential market has increased as well, with a 5.79% year-on-year increase in residential unit launches reported by Knight Frank in H1 2024. Mumbai led the new launches with a 26% share, followed by NCR (17%) and Bengaluru (14%).

These positive developments on both the demand and supply sides of the market are supported by the relatively stable lending ecosystem, where the RBI key rates have remained unchanged since February 2023 (Repo Rate at 6.50% and Bank Rate at 6.75%), keeping interest rates on home loans generally stable as well, major banks' offers staying at about 8-11%. Housing loans maintained by the Indian commercial banks demonstrated a 36.5% year-on-year increase in the financial year 2023-24 and reached INR 28,101 billion (USD 336.2 billion) by July 2024.

Driven by strong economic fundamentals, India's residential rental market continues to gain momentum, however, regional patterns show considerable variation both in demand for rental properties and rental housing stock. On the national level, the availability of rental housing struggled to keep pace with demand, showing a 3.10% year-on-year decline in Q2 2024. Rental prices continued to rise, with a 14.60% year-on-year increase recorded in Q2 2024. Based on the Global Property Guide research, countrywide gross rental yield stands at 4.98%.

Despite global uncertainties, the Indian economy continues to surpass growth expectations, with an average annual GDP expansion of 8.17% between 2021 and 2023, as reported by the International Monetary Fund (IMF). According to Fitch Ratings, India is set to remain among the fastest-growing sovereigns globally and the country's general outlook is stable. At the same time, labor market conditions and unemployment rates, especially in the context of India's large and expanding young population, continue to be a concern among experts.

Demand Highlights:

Residential Sales Surge, Driven by Positive Economic Sentiment

Increased savings during lockdowns, minimal income disruptions among middle- and high-income groups, and a strong economic growth outlook have driven demand in India's residential real estate market. According to recent data from Knight Frank, 173,241 residential units were sold across eight major markets in India during the first half of 2024, marking a healthy 10.6% year-on-year growth and reaching an 11-year high in half-yearly sales.

Note: Monitored markets include Mumbai, National Capital Region (NCR), Bengaluru, Pune, Hyderabad, Ahmedabad, Kolkata, and Chennai.
Data Source: Knight Frank Research.

In terms of property types in demand, homebuyer preferences appear to be shifting significantly, as reflected in the sales distribution by price segment. Residential units priced above INR 10 million (USD 119,900) accounted for 41% of total sales across the eight major markets. This segment experienced a 51% year-on-year growth, making it the primary driver of overall sales growth during the first half of 2024. In contrast, sales in the INR 5-10 million (USD 60,000-119,900) and sub-INR 5 million (USD 60,000) categories declined by 8% and 6% year-on-year, respectively, as homebuyer demand increasingly shifted toward higher-priced, premium properties.

In terms of geographic distribution, Mumbai accounted for the largest share of sales at 27%, followed by the National Capital Region (NCR) at 17%, and Bengaluru at 16%. While most cities experienced positive growth, the NCR recorded a 4% year-on-year decline. However, it should be noted that this drop comes after an exceptionally strong performance in H1 2023, which saw the highest sales in the city in 11 years. Kolkata led the growth with a 25% year-on-year increase, followed by Hyderabad (21%) and Ahmedabad (17%).

Number of housing units sold in major markets, by city:

Knight Frank's half-year report noted, "The strong sales momentum in the first half of 2024, despite the general elections in Q2, is a clear indication of the sustained demand in the market. With a positive economic outlook and the potential for interest rate reductions, there is significant room for further growth. We anticipate the festive season in H2 2024 will drive demand even higher."

This view is echoed by other industry experts. Badal Yagnik, Chief Executive Officer of Colliers India, added, "The housing market has shown resilience over the past few quarters. With the festive season approaching, we expect an uptick in both sales and new launches, positioning the market for a strong close to 2024."

Supply Highlights:

New Launches Reach Record High as Demand Strengthens

Development activity in India's residential market has significantly ramped up, capitalizing on the growing demand. According to Knight Frank, 183,401 residential units were launched across the country's eight major markets in H1 2024, marking a 5.79% year-on-year increase and the highest number of units launched in a half-year period over the past decade.

Note: Monitored markets include Mumbai, National Capital Region (NCR), Bengaluru, Pune, Hyderabad, Ahmedabad, Kolkata, and Chennai.
Data Source: Knight Frank Research.

Mumbai led the new launches with a 26% share, followed by NCR (17%) and Bengaluru (14%). In terms of growth, Kolkata saw the highest year-on-year increase at 60%, followed by Pune at 32%. Conversely, Mumbai (-7%), Ahmedabad (-2%), and Hyderabad (-2%) reported a decline in new launches year-on-year.

Number of housing units launched in major markets, by city:

Since early 2022, the supply of new residential units has consistently outpaced sales, resulting in a gradual buildup of unsold inventory, which grew by 3% YoY in H1 2024, as reported by Knight Frank. While rising inventory levels may appear concerning, they must be assessed alongside sales velocity to provide a clearer picture of market health. The Quarters to Sell (QTS) metric, which calculates the time required to clear existing inventory based on the trailing eight quarters' sales velocity, shows a positive trend. Despite increased inventory, the QTS for the eight markets has steadily declined from 9.5 quarters in H1 2021 to 5.9 quarters (less than 18 months) in H1 2024, indicating improving market fundamentals.

Residential market health in major markets, by city:

Commenting on this trend, Boman Irani, President of the Confederation of Real Estate Developers' Associations of India (CREDAI), said, "Indian real estate has experienced something of a bull run in recent quarters, supported by strong transaction volumes across the top eight cities and positive sentiment towards housing. With the upcoming festive season, coupled with the government's focus on infrastructure and a relatively stable lending ecosystem, we expect this momentum to impact both prices and unsold inventory levels as demand-supply dynamics continue to evolve."

Rental Market:

Growing Urbanization Fuels Rental Demand and Prices

India's rental housing market continues to gain momentum, driven by strong economic fundamentals and enhanced government initiatives aimed at improving transparency and accessibility. Key measures introduced in the Union Budget 2024-2025, such as public-private partnerships to develop dormitory-style housing for industrial workers and the PM Awas Yojana Urban 2.0, are expected to bolster workforce migration and increase demand for rental properties.

According to the latest Rental Index report by Magicbricks, rental property demand experienced a marginal year-on-year decline of 0.5% in Q2 2024. However, regional patterns showed considerable variation. Thane (18.80%), Delhi (18.00%), and Ahmedabad (15.20%) saw the highest year-on-year growth, while Bengaluru (-11.00%), Hyderabad (-8.50%), and Gurugram (-7.60%) reported declines. Despite these regional disparities, overall demand for rental housing in India remains robust, supported by rising employment, rapid urbanization, and improved connectivity.

On the supply side, the availability of rental housing struggled to keep pace with demand, showing a 3.10% year-on-year decline in Q2 2024. Chennai (-37.30%), Bengaluru (-11.50%), and Kolkata (-9.60%) experienced the steepest reductions in rental housing stock. Conversely, Noida (32.40%), Greater Noida (29.00%), and Gurugram (25.90%) saw the most substantial increases in rental supply over the same period.

Rental demand and supply dynamic, by city:

Rental prices have continued to rise, with a 14.60% year-on-year increase recorded in Q2 2024. The average rental rate stood at INR 38.78/sq. ft./month (USD 0.46/sq. ft./month) for furnished apartments, INR 32.94/sq. ft./month (USD 0.39/sq. ft./month) for semi-furnished apartments, and INR 30.35/sq. ft./month (USD 0.36/sq. ft./month) for unfurnished apartments. Mumbai remained the most expensive rental market, with average monthly rents of INR 77,500 (USD 929) for 2 BHK apartments and INR 130,600 (USD 1,565) for 3 BHK units. In contrast, Greater Noida offered the lowest average rents, with 2 BHK units at INR 16,100 (USD 193) and 3 BHK units at INR 21,800 (USD 261).

Rental rates dynamic, by city:

In terms of rental yields, Ahmedabad, Kolkata, and Pune emerged as top performers, each with a gross rental yield of 3.8% in Q2 2024, as per Magicbricks Research. Global Property Guide reported a slightly higher national average gross rental yield of 4.98%.

Looking ahead, Magicbricks Research predicts continued growth in rental demand and rates in the short to medium term, along with an expected increase in rental housing supply as under-construction projects near completion. "The current landscape offers a favorable opportunity for landlords and investors, fostering greater participation in the rental market," commented Sudhir Pai, CEO of Magicbricks.

Mortgage Market:

Stable Interest Rates and Rapid Expansion of Lending

After several consecutive hikes throughout 2022, lending rates of the Reserve Bank of India (RBI) have been stable since February 2023, with the Repo Rate at 6.50% and the Bank Rate at 6.75%. At their most recent meeting in August 2024, the bank's Monetary Policy Committee (MPC) decided to keep all the key rates unchanged and remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target. "These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 percent within a band of +/- 2 percent, while supporting growth," said the MPC resolution.

Data Source: RBI.

As Indian banks mostly have their floating-rate retail loans linked to repo rate since October 2019, in line with the RBI policy trend, interest rates on home loans offered by major banks have been generally stable since the beginning of 2023 at about 8-11%, depending on the type of loan and borrower category, the minimum offer moving only marginally.

Selected banks home loan interest rates (as reported by Forbes Advisor India):

Overall, India's residential lending market has undergone significant changes in recent years due to policy support through both demand and supply-side interventions by the government, the establishment of the Real Estate Regulatory Authority (RERA), singular Goods and Services Tax implementation, stamp duty concessions, tax deductions on housing loans, focus on affordable housing through "Housing for All" (PMAY) subsidy scheme (recently reintroduced in the 2024 budget), and other measures.

As a result, while still relatively low compared to many other nations, the total amount of housing credit maintained by India's financial system (including public and private banks and housing finance companies) has been growing rapidly, expanding from 3.2% of GDP in 2001-02 to 6.60% in 2011-12 and further to 10.52% in 2022-23, according to the reporting from the National Housing Bank (NHB), a regulatory body for regulation and licensing of housing finance companies.

Based on the latest figures from the RBI, housing loans maintained by commercial banks (representing over 80% of the total amount in the financial system) demonstrated a massive 36.5% year-on-year increase in the financial year 2023-24, compared to the average annual growth of 14.6% in the previous 15 years, and reached INR 28,101 billion (USD 336.2 billion) in July 2024. The expansion was notable not only in the nominal value of housing credit but its share in the non-food gross credit extended by commercial banks (16.6% in 2023-24, compared to 14.6% a year ago and 11.1%, on average, in the previous 15 years).

Note: Reporting for financial years ending in March.
Data Source: RBI.

The expansion of residential lending in India is expected to continue. Brokerage house Nomura, cited by The Economic Times, projects that the home loan industry will more than double in the next five years with mortgages growing at a clip of 15% over the next decade. Among the factors that drive the growth of favorable demographic dividends, rising income levels, acute housing shortage, and the government's push for affordable housing via several schemes are named.

Socio-Economic Context:

Outperforming Economic Growth Overshadowed by Unemployment Concerns

Widely considered the world's fastest-growing economy, India has been surpassing all market estimates, exceeding growth expectations for three consecutive years with an average annual real GDP expansion of 8.17% between 2021 and 2023, according to the International Monetary Fund (IMF) data.

Amid global uncertainties, the Indian economy continues to demonstrate outstanding results, driven by strong domestic demand and continuous government efforts toward reforms and capital expenditure. The IMF baseline forecast sees the country's real GDP grow by 6.8% and 6.5% in 2024 and 2025, respectively.

Deloitte's August 2024 outlook also shares this optimistic view, noting: "With prevalent signs of the rural economy rebounding, strong growth in manufacturing, robust bank balance sheets and credit growth, and stronger exports in services and high-value manufacturing, there is confidence that India's underlying potential will help it outpace growth in the rest of the world."

At the same time, nationwide inflation is on a downward trajectory, having decreased from a decade-high 6.70% in 2022 to 5.40% in 2023 and preliminary reported by the RBI at 4.16% in August 2024. "Inflation concerns remain, but we expect them to ease in the latter half of the next fiscal year, barring any surprises from rising oil or food prices. <…> We expect inflation to slowly revert to the RBI's target level of 4% from early next year and remain within its comfort value over the forecast period," says Deloitte. The IMF projects the indicator at 4.6% in 2024 and 4.2% in 2025.

Data Source: IMF.

The labor market remains the biggest economic challenge for the newly elected Indian government (now in its third term). In 2023, ILO estimate for total unemployment in India was at 4.2% (down from 4.8% in the previous year and 6.4% two years prior), at the same time youth unemployment for people aged 15-24 was estimated at 15.8% (down from 17.8% a year ago and 20.9% two years prior).

In June 2024, based on its own household survey, the Centre for Monitoring Indian Economy, an economic think tank, estimated unemployment in the country significantly higher at 9.2%, up sharply from their earlier estimates of 7% in May 2024.

According to experts polled by Reuters earlier this year, despite growing at the fastest pace among major peers, the country's economy has failed to generate enough jobs for its large and expanding young population.

"The rising number of discouraged workers had pushed India's LFPR (labor force participation rate) down well below levels exhibited by the four Asian tigers at comparable stages in their demography. <…> Bharatiya Janata Party's focus on existing employment drivers (infrastructure, manufacturing, and government jobs) that have not moved the needle much to date is all the more worrying. Without a more concrete plan, India runs the risk of missing out on potential demographic dividends," said Kunal Kundu, India economist at Societe Generale, quoted by Reuters.

Data Source: World Bank.

Overall, according to Fitch Ratings, which recently affirmed the country's BBB-standing and stable outlook, India is set to remain among the fastest-growing sovereigns globally, with public infrastructure capex serving as a key growth driver. As a Bharatiya Janata Party (BJP) led coalition recently won a third consecutive term in national elections, policy continuity is expected around the infrastructure drive, digitization, and ease of doing business measures, however, coalition politics and a weakened mandate (due to lack of outright majority) will likely constrain the government's ability to enact major economic reforms, limiting upside to potential growth, Fitch Ratings pointed out.

Sources:

1. Reserve Bank of India (RBI)
   1. All-India House Price Index (HPI) for Q1:2024-25: https://rbi.org.in/
   2. Major Monetary Policy Rates: https://data.rbi.org.in/
   3. Minutes of the Monetary Policy Committee Meeting, August 6 to 8, 2024: https://website.rbi.org.in/
   4. Sectoral Deployment of Bank Credit - July 2024: https://website.rbi.org.in/
   5. Database on Indian Economy: https://data.rbi.org.in/
2. National Housing Bank
   1. Report on Trend and Progress of Housing in India, 2023: https://www.nhb.org.in/
   2. Annual Report 2022-23: https://www.nhb.org.in/
3. National Portal of India
   1. Union Budget 2024-2025: https://www.india.gov.in/
4. International Monetary Fund (IMF)
   1. Country Overview: India: https://www.imf.org/
5. World Bank
   1. World Development Indicators: https://datacatalog.worldbank.org/
6. Deloitte
   1. India economic outlook, August 2024: https://www2.deloitte.com/
7. Fitch Ratings
   1. Fitch Affirms India at 'BBB-'; Outlook Stable: https://www.fitchratings.com/
8. Knight Frank
   1. India Real Estate Residential and Office Market H1 2024: https://www.knightfrank.co.in/
9. Colliers
   1. Average Housing Prices Surged 12% YoY; Delhi NCR Saw Highest YoY Growth. Delhi NCR & Bengaluru Saw Highest Quarterly Price Rise at 16% & 8% Respectively: https://www.colliers.com/
10. Magicbricks Research
    1. PropIndex Apr - Jun 2024: https://property.magicbricks.com/.
    2. Rental Index Apr - Jun 2024: https://property.magicbricks.com/
11. Forbes
    1. Home Loan Interest Rates For September 2024: https://www.forbes.com/
12. Reuters
    1. India's Home Prices to Rise Steadily, Affordable Housing Supply to Lag Demand: Reuters Poll: https://www.reuters.com/
    2. Unemployment Biggest Worry in India, World's Fastest Growing Economy: Reuters Poll: https://www.reuters.com/
13. Centre for Monitoring Indian Economy
    1. Unemployment Rate Rises to 9.2% in June 2024: https://www.cmie.com/
14. The Economic Times:
    1. Home loan market to more than double in next five years: Nomura: https://economictimes.indiatimes.com/
    2. Interest subsidy for middle class taking home loan under PMAY scheme to come back: Budget 2024: https://economictimes.indiatimes.com/