Housing Prices & Rentals in India Set to Skyrocket in 2025

India's average home prices and rental rates are projected to exceed consumer inflation this year, as indicated by a Reuters survey of housing experts who expressed divided opinions on whether affordability for first-time homebuyers will improve or decline.

The combination of sluggish economic growth, stagnant wages, and a lack of well-paying job opportunities has left many working-class families with diminished savings. Over the past decade, home prices have nearly doubled, primarily driven by high-income earners in the housing market.

Moreover, a significant imbalance between robust demand and limited supply has led to inflated home prices, forcing tens of millions to resort to renting. According to median forecasts from a survey conducted between February 17 and March 4 among 14 property market experts, average home prices in India are expected to rise by 6.5% this year and 6.0% the following year, following a 4.0% increase last year. This outlook remains largely unchanged from a December poll conducted prior to the Reserve Bank of India's decision to lower interest rates, which is anticipated to be a brief and modest cycle.

Urban rental prices are anticipated to increase even more dramatically, with projections of a 7.0%-10.0% rise over the next year. Such an escalation would significantly surpass the expected consumer inflation rate of 4.3% and 4.4% over the next two fiscal years, as reported in a separate Reuters survey. As rental costs continue to soar, the journey to homeownership becomes increasingly challenging for first-time buyers striving to accumulate sufficient funds for a down payment.

"This is a double-whammy: home prices will outpace inflation and rents have already been skyrocketing for years. For millions I think homeownership is becoming a distant mirage," said Pankaj Kapoor, Managing Director, Liases Foras.

"With these price escalations, affordability for first-time buyers is likely to decline as rising costs outpace income growth making homeownership more challenging - especially in high-demand metropolitan regions," said Arvind Nandan, Managing Director of Research, Savills India.

"Although there have been policy measures to support demand and infusion of affordable housing in India...There is already an existing shortage of 10.1 million units," said Vivek Rathi, Director of Research at Knight Frank.