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Indian Housing Market Scenario:

India’s housing market will remain resilient despite rising interest rates and a weak global economic outlook, according to a Reuters poll of property analysts who have barely changed their forecasts from three months ago.

Defying a global trend of falling housing prices as mortgage rates rise and crimp affordability, India has exhibited resilience and is emerging from a decade-long downturn due to strong demand.

A major source of employment in a country of 1.4 billion people where a majority are unskilled, the Indian housing market is likely to remain a stable contributor to economic activity in Asia’s third-largest economy.

Average home prices were forecast to rise 5.5% and 5.0% this year and next, poll medians from a Feb. 16 to March 3 survey of 13 property market experts showed.

Those expectations were largely unchanged from a December survey, slightly outpacing consumer price inflation projections of 5.1% and 4.5% for fiscal years 2023/24 and 2024/25, respectively, a separate Reuters poll showed.

“Post the COVID-19 pandemic, the urge to own a house is higher than ever and thus, the residential segment has witnessed strong demand,” said Divyesh Shah, associate director at CARE Ratings.

“While rising inflation and interest rates may impact demand to a certain extent in the near-term, the industry is however poised for steady growth in the coming 2-3 years and thus home ownership is likely to increase.”

The Reserve Bank of India has raised interest rates by a total of 250 basis points since May last year as it tackles stubbornly high prices and is expected to add another 25 basis points, taking it to 6.75%, in April and then pause until the end of 2023.

All but one of 13 analysts said homeownership would rise over the next few years, partly due to a strong inclination towards owning rather than renting a home.

“India has always been an economy where home purchase is preferred over renting. The uncertainty around the pandemic further amplified the need for home ownership and security,” said Abhinav Joshi, head of research at CBRE India.

The primary concern, in one of the most populous countries in the world where millions live in abject poverty, is the perennial lack of affordable homes.

A recent increase in unemployment also raises concerns about the sustainability of the current housing market trend.

All but one of 11 analysts who answered a separate question said purchasing affordability over the coming year would worsen. Only one said it would improve.

“Amid rising prices, affordability will only worsen in the coming quarters. The financially stable seekers will continue to buy property, but buyers in the affordable and mid-segments would be impacted by this,” said Anuj Puri, chairman at ANAROCK Property Consultants.

A regional breakdown of the poll data showed prices in Bengaluru, Chennai and Delhi, including its surrounding national capital region, will rise between 5% and 6% this year.

However, house prices in Mumbai were forecast to grow at a slower pace of 3.5%.

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