India’s home prices, rent expenses to climb faster than inflation this year,according to a report
India’s housing market is set to see home prices and rental costs rise faster than consumer inflation this year, according to a recent Reuters poll of housing experts. However, opinions are divided on whether first-time homebuyers will face worsening affordability or see improvements.
Rising Home Prices and Rental Costs
A survey conducted between February 17 and March 4 among 14 property market experts predicts that:
- Home prices will rise by 6.5% in 2025 and 6.0% in 2026.
- Last year (2024) saw an increase of 4.0%.
- Urban rental costs will jump 7.0%-10.0% this year, far exceeding expected consumer inflation rates of 4.3% and 4.4% for the next two fiscal years.
Despite stagnant wages, slow economic growth, and limited high-paying jobs, housing demand remains high. However, supply constraints have pushed prices up, making homeownership increasingly difficult for many Indians.
Housing Affordability Crisis
Rising property prices and soaring rents are making it harder for first-time buyers to enter the housing market.
Pankaj Kapoor, Managing Director at real estate research firm Liases Foras, described the situation as a “double whammy” for home seekers:
“Home prices will outpace inflation, and rents have already been skyrocketing for years. For millions, homeownership is becoming a distant mirage.”
He also highlighted that economic growth is not translating into higher incomes, leaving homeownership a privilege for the wealthy.
Price Trends in Major Indian Cities
The survey predicts strong price increases in India’s biggest cities:
- Mumbai & Delhi NCR: Prices to rise 5.8% to 8.5% in 2025 and 2026.
- Bengaluru & Chennai: Prices to increase 5.0% to 7.3% over the next two years.
Experts remain divided on affordability:
- 7 out of 14 analysts believe affordability for first-time homebuyers will worsen.
- The other 7 analysts believe affordability could improve despite rising costs.
Arvind Nandan, Managing Director at Savills India, pointed out:
“Affordability is likely to decline as home prices outpace income growth, making homeownership even more challenging—especially in high-demand metro areas.”
Why Affordable Housing Supply Remains Low
As millions of people migrate to cities, affordable housing remains out of reach despite government initiatives to increase supply.
When asked what could increase the supply of affordable housing, 11 out of 13 experts said it would require intervention from the central or local government.
Vivek Rathi, Director of Research at Knight Frank, highlighted the scale of the problem:
“Despite policy measures to boost affordable housing, India already faces a shortage of 10.1 million units.”
India’s housing market is becoming increasingly unaffordable due to rising home prices, escalating rents, and stagnant incomes. While demand remains strong, limited supply is forcing millions into rentals, with homeownership becoming a distant dream for many. The solution may lie in government intervention to boost the supply of affordable homes, but for now, the wealthy remain the dominant buyers in the market.
