Real Estate Market Forecast: Housing Prices to Continue Rising in 2025

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The Indian real estate market has been on an upward trajectory, with housing prices experiencing consistent growth over the past few years. As we look ahead to 2025, this trend shows no signs of abating. According to a recent Reuters poll, home prices in India are expected to rise by 6.5% in 2025, primarily driven by robust demand in the luxury and ultra-luxury housing segments.

Key Drivers of Housing Price Increase

1. Demand in Luxury and Ultra-Luxury Segments: The surge in housing prices is largely attributed to the increased demand from affluent buyers seeking premium properties. This trend has been particularly evident in metropolitan regions where luxury housing projects are in high demand. The wealthiest 1% of the population, owning 40% of the country's wealth, are sustaining these price rises.

2. Economic Growth and Urbanisation: India's steady economic growth and rapid urbanisation have led to a burgeoning middle and upper-middle class with higher disposable incomes. This demographic shift has increased the appetite for homeownership, especially in urban centers where employment opportunities are abundant.

3. Infrastructure Development: Ongoing and planned infrastructure projects, such as new highways, metro lines, and airports, have enhanced connectivity and accessibility in various regions. These developments have made peripheral areas more attractive to homebuyers, leading to an appreciation in property values.

Regional Highlights

Delhi-NCR: The Price Leader Delhi-National Capital Region (NCR) has emerged as a frontrunner in housing price appreciation. In 2024, the region witnessed a staggering 31% year-on-year increase in housing prices, the highest among India's top eight cities. This surge is primarily attributed to strong sales in the luxury and ultra-luxury segments, with areas like Dwarka Expressway and Greater Noida leading the charge.

Bengaluru and Ahmedabad: Notable Growth Bengaluru saw a 23% year-on-year rise in housing prices during the last quarter of 2024, driven by healthy demand and infrastructure upgrades. Similarly, Ahmedabad experienced a 15% increase, reflecting the city's growing prominence as a real estate hub.

Pune: Steady Appreciation Pune's real estate market has also shown resilience, with a 9% year-on-year price increase in 2024. The city's strategic location, coupled with a robust IT sector, continues to attract homebuyers and investors alike.

Unsold Inventory Trends

The reduction in unsold inventory is a positive indicator of the market's health. As of the fourth quarter of 2024, unsold inventory across the top eight cities declined by 5%, reaching a two-year low of less than 10 lakh units. Pune recorded the highest annual drop at 14%, followed by Hyderabad at 13%. This decline suggests that developers are aligning supply with the evolving demand dynamics, particularly in the luxury segment.

Affordable Housing: A Persistent Challenge

While the luxury segment thrives, the affordable housing sector faces challenges. The rising cost of living and property prices have made homeownership increasingly unattainable for middle and lower-income groups. As a result, many potential buyers are opting to rent, leading to a projected 7.5% to 10% increase in rental prices over the coming year. The shortage of affordable homes persists, with new launches predominantly focused on premium and high-end segments.

Future Outlook

Industry experts anticipate that the upward trajectory in housing prices will continue beyond 2025. Factors such as sustained demand from affluent buyers, ongoing infrastructure developments, and economic growth are expected to fuel this trend. However, for the market to achieve balanced growth, there is a pressing need to address the affordability crisis. This includes increasing the supply of affordable housing and implementing policies that make homeownership more accessible to a broader segment of the population.

In conclusion, India's real estate market is poised for continued growth in 2025, with housing prices expected to rise by 6.5%. While the luxury segment leads this surge, it is imperative to focus on creating inclusive opportunities that cater to the diverse needs of all homebuyers.