Why an affordable house in India is still a distant dream for many!

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If you’re thinking of buying your own sweet home, on affordable rates, sometime soon, you might have to postpone your plans. A Reuters poll of 12 Indian property analysts noted that home prices will stay significantly above present consumer inflation rates in India, for the foreseeable future. This, despite CPI inflation rate coming down to 4.7% in April, 23.

But even though consumer inflation rates have fallen below RBIs upper threshold of 6%, house prices are estimated to jump by 6%. While this is only a slight jump from the previous figure of 5.5% in March, it lands a serious dent on India’s affordable housing saga.

The market is expecting RBI to sustain repo rates at 6.5% for the rest of 2023. As a result, the cost of borrowing or that of a home loan, which rises with a jump in interest rates, was expected to moderate. However, despite the interest rate hikes slowing down for the time being, real estate prices will continue to rise steadily.

These rates will continue to outpace India’s inflation forecasts of 5.1% in 2023-24 and 4.8% in 2024-25, as most experts remain extremely bullish on India’s real estate market. But if you’re a first time home buyer, you’re set to face a tough market, the analysts noted in the same poll. While 6 analysts remained optimistic for an improving outcome, 5 highlighted that the situation is only set to worsen in the times to come.

Luxury real estate demand on the rise

On the other hand, the demand for luxury housing in the country is skyrocketing. As per real estate consultancy Anarock, the demand for luxury housing (property above Rs 1 crore), in top 7 Indian cities, namely Bangalore, Chennai, Kolkata, Mumbai, NCR, Pune and Hyderabad soared from 7% in 2019 to 18% in 2022. In fact, it remains robust in 2023, with 25% of 1.14 lakh units sold in these cities in the first quarter bracketed under this category.

The meteoric rise in this segment is also set to drive up property prices, as people become more willing to dish out bucks for high-priced homes. In a recent instance, DLF sold out all 1,137 flats in its Gurugram-based premium luxury project, “The Arbour”, within just 3 days.