Despite higher rates, home prices across India to rise fastest in 5 years (2024)

FAQs

Why property prices are rising in India? ›

The report also highlighted that the cost of buying a house in India continues to rise due to several factors, including the continuous rise in the cost of raw materials and labour, the growing demand for homes post-COVID, and the cessation of government-funded subsidy schemes in March this year.

They determine how much consumers will have to pay to borrow money to buy a property, and they influence the value of real estate. Low-interest rates tend to increase demand for property, driving up prices, while high interest rates generally do the opposite.

Housing prices in India have surged during the first quarter of 2023 with the average price rise across all the major realty markets being close to 7% YoY, according to a report by PropTiger.com. The report said all the markets covered in the analysis showed an upward movement in average rates of new homes.

YoY growth data is updated quarterly, available from Mar 2011 to Dec 2022, with an average growth rate of 5.1%.

Rising prices lead to increase in the inequalities of incomes. The incomes of the producers and traders increase. It is so because with every rise in prices, they are able to fetch larger money. As against this, the people with fixed incomes i.e., wage-earners and salaried employees lose.

Interest rate

The current home loan interest rates range around 8.5 percent suggesting that it is a good time to buy a home. Moreover, with the stubborn inflation and the expected rate tightening by the central bank, locking into a property deal while the rates are comparatively low is a good idea.

Key Takeaways. Your interest rate becomes more important if you plan to live in your home for more than five years because you'll be paying it for a longer period of time. Buying a home at a lower price but at a higher interest rate can be workable if you can refinance the mortgage in the future to reduce your rate.

Fewer Buyers in the Real Estate Market

It's harder to qualify for a loan when interest rates are high, which means there will be fewer buyers competing for existing home inventory. Homes are staying on the market longer, which means you may be able to take more time to consider your choices and make a decision.

Mortgage rates and inflation go hand in hand. When inflation increases, typically interest rates increase too so they can keep up with the value of the dollar. If inflation decreases, mortgage rates drop. During periods of low inflation, mortgage rates tend to stay the same or slightly fluctuate.

Is investing in Indian real estate worth it? Real estate investment in India has a lower volatility quotient than other business investment options like equities and mutual funds. It remains one of the safest investment alternatives in India because it is a tangible asset.

Is India in real estate bubble? ›

Is India in a housing bubble? No, the prices in the Indian real estate market have taken sufficient time to rise. Despite the rise in price in recent years, it cannot be termed a real estate bubble.

If you are buying a residential property to live in, it is advisable to go ahead. However, if you are buying a second home for investment purposes, you may consider exploring options, including commercial property, REITs or even fractional ownership. Commercial property is preferred for higher rental yields.

In 2022, Mumbai remained India's most expensive city on the residential market with a square feet price of around seven thousand Indian rupees per square feet. Among the eight biggest metropolitan areas of India Ahmedabad has the lowest square feet price at three thousand Indian rupees.

The current decade has seen the introduction of numerous reforms to promote transparency, efficiency, and innovation within the sector. With these initiatives and improved infrastructure development planned for 2023, India's real estate market is expected to continue to grow steadily at a healthier rate than before.

As per it, in 2022 average luxury real estate price in Mumbai stood at Rs 707,996 per square-meter or Rs 65,771 per square-feet. While in Delhi, the average rate of luxury properties was Rs 353,982 per sq. meter or Rs 32,886 per sq.

They consider elements like production cost, quality of the product, advertisem*nt and promotion.

Systematix Institutional Equities estimated that India's retail inflation would remain sticky at around 7 per cent during the rest of FY23, a little higher than RBI's estimate of 6.7 per cent. While this number looks high, it fades when compared with inflation figures of other countries.

The rising cost of borrowings has also added to the burden of developers. As a result, the real estate sector has witnessed an average increase of 5 to 8 per cent in property prices across key markets in India in the past one year, says Hiranandani.

With proper upkeep, you can keep it standing for decades. However, the components that make up a place deteriorate due to environmental factors and, of course, human carelessness, the tropical environment of India, temperature fluctuations, and the extended period of monsoon with humid weather harm the house.

Which is better flat or house in India? ›

This will depend on the purpose of investment. A house may be better for end-users but will involve higher capital expenditure and will also offer greater returns. A flat offers limited customisation options but has a lower cost of acquisition and maintenance also and is easier to liquidate.

"Possibly in 2024, but it will depend on the Fed's decisions about raising rates in the second half of the year," says Fleming. "And even if they do go down, it won't be back to the rates of yesteryear. 6% mortgage rates used to be normal, and that's more reasonable to expect too."

Mortgage rates are likely to decrease slightly in 2023, although they're highly unlikely to return to the rock-bottom levels of 2020 and 2021. However, rate volatility may continue for some time.

'I believe by the end of 2023 we will see rates start to fall with a target of between 2.5 to 3 per cent in 2024.

Most officials estimate the federal funds rate will top out at a range of 5.63-5.87% in 2023, suggesting there might be as many as two more quarter-point hikes this year.

However, as high inflation costs press down on buyers, it could depress home values. Although he doesn't expect a major housing market crash, Buehler says he sees home values flattening out as inflation nestles into the housing market.

As long as inflation continues to rise, your savings will afford you more purchasing power now than they will in the future. Even if inflation and home prices seem high now, as long as inflation continues to increase house prices, you will be better off buying a house today than you will be tomorrow.

The predictions made by the various analysts and banks provide insight into what the financial markets anticipate for interest rates over the next few years. Based on recent data, Trading Economics predicts a rise to 5% in 2023 before falling back down to 4.25% in 2024 and 3.25% in 2025.

Over the same period, federal debt and interest rates are both projected to rise, causing net outlays for interest to increase steadily, from 1.7 percent of GDP in 2020 to 2.6 percent of GDP in 2030.

A housing market crash won't affect your existing fixed-rate mortgage. However, if the value of your home drops below your purchase price, then you'll be making payments that are greater than the worth of your property.

Is it better to buy land or flat in India? ›

Plot vs Flat - Income

If earning a regular rental income is on your mind, you must invest in a built-up flat. An apartment can be rented out to fetch you some income, whenever you want, which is not possible in the case of plots. There is no income from plots till the time you construct upon it.

Simplified Buying Process

Few matters seem to be favourable for NRIs to invest in Indian real estate properties. Foreign currency exchange is so common in India. Then, the taxation regime is so simplified. Tax incentives such as exemption from capital gains tax on sales can be availed by NRIs.

Real Estate Tycoon #1: Rajiv Singh

The richest real estate tycoon in India, entrepreneur and DLF chairman, Rajiv Singh has a net worth of INR 61,220 crore.

The size of the country's real estate industry is expected to reach $1 trillion by 2030 from $200 billion in 2021, according to a joint report prepared by NAREDCO and EY.

2023 looks promising as well and residential demand could increase by 10-15% as end-user demand is expected to maintain its momentum. Simultaneously, supply is also expected to increase as many large developers are buying new land parcels and gearing up for big project launches.

India's commercial real estate market size is USD 20.71 billion in 2023, according to the market intelligence and advisory firm Mordor Intelligence's report titled 'India Commercial Real Estate Market - Growth, Trends, Covid-19 Impact, AND Forecasts (2023 - 2028).

It affects the GDP, trade relations, transactions, and purchasing power of consumers. In spite of that, there are countries and sectors which have prepared their ways out of a such situation. And, the real estate sector in India is turning the tables even in the face of the looming 2023 recession.

In 2023, 43% of developers anticipate residential demand to remain stable, while 31% believe it will rise by up to 25%, according to the “Real Estate Developers Sentiment Survey” conducted by the Realtors' apex body CREDAI, real estate consultant Colliers India, and property research firm Liases Foras.

The desire for bigger homes, an influx of more investors including NRI and OCI, as well as a stable industry outlook make 2023 the best time for investing in real estate, and by taking cautious steps, investors can make the most of it.

According to the report, after Mumbai, cities like New Delhi and Bengaluru fall on the second and third place in the most expensive list for expats list in India. The Mercer's Cost of Living survey was conducted across 227 cities from across five continents.

Which is the most unaffordable city in India? ›

According to Mercer's 2023 Cost of Living survey, which includes 227 cities from across five continents, Mumbai, positioned at 147 in the global ranking, retains the top spot as India's most expensive city for expats, while Hong Kong topped the global chart.

1. Malabar Hill, Mumbai: Home to various celebrities like Juhi Chawla and Akshaye Khanna, Malabar Hills is one of the costliest residential areas in Mumbai. The Hill gives you the view of Nariman Point, Marine Drive, and Chowpatty.

Chennai is enriched with well-experienced and qualified real estate developers who leave no stone unturned to make each project remarkable. In the first quarter of 2021, the city built approximately 4,500 new housing units and the residential market has been continuously growing since then in Chennai.

The rating agency has revised the outlook on the residential real estate sector to 'neutral' from 'improving' for fiscal 2024. Housing prices rose 8–10% in this fiscal year and may further increase by 5% in 2023–24, India Ratings and Research (Ind-Ra) said on Tuesday.

Yes, a Non-Resident Indian can buy property in India. This can be residential land, homes, or flats in India, but not agricultural land, plantation, or farmhouse properties. An NRI is defined as an Indian citizen residing outside the country for more than 182 days a year.

Mumbai: Known as the financial capital of India, Mumbai offers a wide range of properties at different price points. Bengaluru: With a growing population and economy, Bengaluru is home to a large number of tech companies and start-ups, which has led to a demand for both residential and commercial properties.

South Mumbai's Tardeo is India's costliest residential location, commanding a staggering Rs 56,000 per sq ft average rate for homes available in the primary real estate market, according to property consultant Anarock.

Despite all these things the real estate market will do well in 2023 since we can already see that the economy will be robust, local activity will resume and the government will take action to help tier-2 cities expand even more.

According to the CoreLogic HPI Forecast, home prices are projected to continue their upward trajectory. The forecast indicates an expected month-over-month increase of 0.8% from March 2023 to April 2023 and a year-over-year increase of 4.6% from March 2023 to March 2024.

Is 2023 a good year to buy a house in India? ›

Consequently, 2023 is anticipated to be a period of robust growth for the real estate market. In line with this, NRIs and millennials planning to invest in residential property will drive the 2023 real estate market as a result of homes becoming more affordable and fractional ownership becoming more commonplace.

It affects the GDP, trade relations, transactions, and purchasing power of consumers. In spite of that, there are countries and sectors which have prepared their ways out of a such situation. And, the real estate sector in India is turning the tables even in the face of the looming 2023 recession.

Is India in a housing bubble? No, the prices in the Indian real estate market have taken sufficient time to rise. Despite the rise in price in recent years, it cannot be termed a real estate bubble.

Whether in the US or India, residential properties are considered safe investment options. But the real estate regulations and practices are more transparent, favourable and well settled in the US. They include ease of purchasing, relatively lower tax rates, availability of higher loan amounts, and easy exit options.

Investments in land produce income without requiring capital outlay or risk, which makes them one of the few assets that offer good returns in future. The only thing required of you is patience, as land prices tend to go up over time, even if there are no major changes in the market.

If you're planning to buy a new home, you need to make sure that you're not only financially ready but you're prepared mentally as well. Often, potential homebuyers usually end up waiting for the festive season, which usually spans between mid-October to mid-November in India, to purchase a new property.

Now that India has the world's largest population, it has become ever more important to invest in, and develop real estate, which also bears responsibility for the environment and sustainability. The Union Budget 2023 encourages optimism in real estate as a reliable ally for long-term growth.

The real estate sector will reach US$ 1 trillion in market size by 2030, up from US$ 200 billion in 2021, and contribute 13% to the country's GDP by 2025. This sector needs to be accountable to its stakeholders, as it will be a major driving force of the economy.