Housing prices may see modest growth in 2025, says property experts

India's primary housing market may register a modest single-digit price rise in 2025 after appreciating by an average 21 per cent last year as developers are expected to boost new supply to match up demand, according to industry experts.

Real estate developers and property consultants are expecting that the RBI will cut the repo rate this year, enabling banks to lower interest rates on home loans.

They also hope for some fiscal incentives in the upcoming Budget to boost supply and demand for the affordable housing segment, which has lost sheen in the past few years.

New home sales across seven major cities declined for the first time since the pandemic, as a sharp rise in housing prices and still elevated borrowing costs ruined the appetite of buyers in 2024.

Sales volume declined 4 per cent during 2024 to 4,59,650 units across seven major cities, while new supply fell 7 per cent to 4,12,520 units, data from consultant Anarock showed.

That was the first drop in sales after three straight years of stellar growth following the COVID downturn and was attributed in part to a high base effect, a fall in launches and an appreciation in price.

After a 47 per cent decline in 2020, housing sales had grown by 71 per cent, 54 per cent and 31 per cent in 2021, 2022 and 2023, respectively.

Housing sales stood at 2,61,355 units in 2019 but plunged next year to 1,38,350 units due to the outbreak of the COVID-19 pandemic.

Sales revived to 2,36,510 units in 2021 and then surged to 3,64,880 units in 2022 and 4,76,525 units in the 2023 calendar year, before witnessing a marginal de-growth in 2024 across Delhi-NCR, Mumbai Metropolitan Region, Kolkata, Chennai, Hyderabad, Bengaluru and Pune.

Anarock Chairman Anuj Puri expects the housing market to "stabilise" in 2025, with muted growth in prices against an average 21 per cent year-on-year rise during 2024.

"Much also depends on what the upcoming Union Budget holds in store," Puri said.

The industry has a long-standing demand for an increase in the deduction limit of interest on home loans under the Income Tax Act to boost housing sales, particularly in affordable and mid-income categories.

Realtors body NAREDCO National President G Hari Babu said, "Looking ahead to 2025, the real estate sector is expected to experience continued growth.

"This momentum will be driven by a stable economic environment and supportive government initiatives." Realtors apex body CREDAI National President Boman Irani pointed out that the Indian real estate sector, which is the second biggest job creator, still faces "policy-related roadblocks" restricting it from realising its full growth potential.

"Going into 2025, we are optimistic of government interventions to streamline certain policy roadblocks, especially for the affordable housing segment...," he said.

Irani stressed the need to redefine affordable housing, expand 80C benefits, and reduce interest rates to propel growth in Indian real estate, whose market size -- as per Naredco-Knight Frank report -- stood at nearly USD 500 billion in 2022 and is estimated to reach USD 5.8 trillion by 2047.

CREDAI and Colliers report, too, estimates the Indian real estate market size to jump multi-fold to USD 5-7 trillion by 2047.

Real estate experts strongly believe that the consolidation in the real estate sector will continue, with consumer demand continuously shifting towards reputed players from fly-by-night builders.

In order to cater to this shift in demand, big and branded real estate players have been aggressive in land acquisition through outright purchases and partnerships with landowners. This trend will continue in 2025 and beyond.

CREDAI has been demanding that the government should also help in augmenting the availability of land parcels to fulfil the growing need for residential and commercial real estate spaces to support rapid urbanisation and the country's overall economic growth.