In a country of over 1.4 billion people, demand for housing is driven by a few, yet the sheer scale of the market is staggering, offering developers incentives to focus on the ultra-rich as profit margins tighten in the affordable segment.Photo: Shutterstock4 min read Last Updated : Sep 03 2024 | 9:15 AM IST Home prices in India are set to rise steadily over the next few years, driven by demand for luxury properties from cash-rich individuals, according to a Reuters poll of housing experts who forecast rent increases will outpace consumer inflation. While economic growth in Asia's third-largest economy is likely to outpace its major peers, policy experts warn the benefits are increasingly being funnelled to a select few, leaving millions of job-seekers, especially young people, out of the growth story. With a supply of affordable homes dwindling and those with cash cornering the property market, many aspiring first-time buyers are being forced to keep renting. After growing 4.3% last year, national home prices in India were expected to rise 7.75% this year, an upgrade from the 6.0% predicted in May, according to the median forecast from the Aug.

20-Sept.

2 survey of 16 property market experts. Home prices are then expected to increase 6.0%-6.25% in the next two years.

Average home prices in India broadly refer to housing in major cities. "Housing demand is heavily tilted towards the luxury housing segment.

This maintains a seemingly unstoppable growth curve while affordable housing continues to bleed," said Anuj Puri, chairman at ANAROCK Property Consultants. "Tellingly, there was no new affordable supply.

It is little wonder that developers are aligning supply with the prevailing demand and are launching more luxury housing projects now." In a country of over 1.4 billion people, demand for housing is driven by a few, yet the sheer scale of the market is staggering, offering developers incentives to focus on the ultra-rich as profit margins tighten in the affordable segment. Ultra-high-net-worth individuals in India typically own more than two properties, with nearly 12% of them planning to buy another home this year, according to Knight Frank's wealth data. Even after the Reserve Bank of India (RBI) raised interest rates by 250 basis points from May 2022 to Feb.

2023, India's housing market trends barely moved.

A post-pandemic frenzy among high-income earners fueled rising prices, further stretching affordability. When asked what will happen to affordability for first time home buyers over the coming year, property market experts were nearly split, with 10 saying it would improve and eight saying worsen. "First we have to agree this market is not for everyone.

There's a bare minimum income for entry, and with income expected to grow faster than house prices in tier-one cities, affordability will improve only for those who are wealthy and generate enough income," said Pankaj Kapoor, managing director at Liases Foras. "If your income is 5-10 lakh rupees ($5,961-$11,922), which is average, and the house price is over 50 lakh, you cannot afford in the cities where the jobs are.

Even if you find something within your budget, it will be in a far-off location, making it impractical to live there and commute to work." Ajay Sharma of Colliers International said housing affordability will worsen as housing value increases outstrip salary growth and added "key residential hubs in Bengaluru, Mumbai, Pune and Gurgaon will continue to see rental increases due to focused demand." A lack of well-paying jobs in smaller towns is driving people to flock to larger cities in search of better opportunities, which has pushed rents much higher in the last few years. When asked how much will average urban home rents change in India over the coming year, 16 housing experts gave a median forecast of 6.5%-10%, outpacing a consumer price inflation forecast of around 4.5% for the next two fiscal years. (Other stories from the Q3 global Reuters housing poll) ($1 = 83.8720 Indian rupees)   (Reporting by Vivek Mishra and Rahul Trivedi; Polling by Susobhan Sarkar; Editing by Ross Finley and Sharon Singleton)(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)First Published: Sep 03 2024 | 9:15 AMIST