Average home prices in India up 10% in first quarter this year: Report

3% increase in unsold inventory in top eight cities of the country, it says

Average home prices in India’s top eight cities increased 10 per cent in the January-March quarter compared to the same time last calendar year, said a report on Thursday.

"The surge in housing prices is a direct consequence of the robust housing demand that we’re witnessing, especially in premium and luxury housing, by homebuyers across the country," said Boman Irani, president of CREDAI National. He was referring to ‘CREDAI – Colliers - Liases Foras Housing Price-Tracker Report Q1 2024’.

"These are directly linked to not just a stable lending ecosystem but also the emergence of various micro-markets that have been the primary beneficiaries of significant infrastructural projects, which have altered the demand-supply dynamics in residential real estate. We do not foresee this momentum slowing down in FY24/25 as well."

The highest price surge was in Bengaluru at 19 per cent to Rs 10,377 per square foot compared to Rs 8,748 per square foot in the same quarter last year. Within the city, the Periphery and Outer East micro-market saw the steepest rise at 32 per cent. It was followed by the Periphery and Outer North with 18 per cent annual growth in average housing prices.

Delhi-National Capital Region followed with a surge of 16 per cent to Rs 9,757 per square foot compared to Rs 8,432 per square foot last year. In Delhi, the highest increase was along the Dwarka Expressway at 23 per cent.

Ahmedabad and Pune followed with an increase of 13 per cent each to Rs 7,176 per square foot and Rs 9,448 per square foot, respectively.

"Factors like luxury demand, upcoming infrastructure projects, and strategic launches drive these increases. With moderate inflation and interest rates, the real estate sector is expected to maintain demand due to affordability," said Pankaj Kapoor, managing director at Liases Foras, a real estate data and analytics company.

The top eight cities had a 3 per cent increase in unsold inventory, showing that demand for homes was lower than the supply.

As of Q1 2024, unsold inventory across the top eight cities stood close to 1 million units, with the Mumbai Metropolitan Region alone having almost a 40 per cent share.

"Developers are likely to keep a close watch on available stock and anticipated demand while timing their new launches in the near term," said the report.

Despite a surge in inventory, home prices are likely to increase due to lending rate cuts expected later this year.

"With prospects of a reduction in benchmark lending rates in the ongoing financial year, affordability can improve in the near term, especially for the EMI-dependent home buyers," said Badal Yagnik, chief executive officer of Colliers India, a real estate company.

"The prices could increase by 10-15 per cent, bridging the gap between affordability and inflation-adjusted prices," said Kapoor.