India’s Home Prices to Remain Above Inflation: Reuters Poll

According to a recent poll of property analysts by Reuters, home prices in India are expected to remain above consumer inflation despite expectations that interest rates will stay higher for longer than previously forecasted. The pandemic has led to a surge in savings and minimal income disruption for cash-rich home buyers, resulting in a rise in demand that has made the market more resilient to interest rates than initially expected. Analysts predict that national home prices will reach a median of 6.0% this year, a modest upgrade from the 5.5% expected in a March survey. Forecasts ranged widely, from 1.8% to 20.0%, with average home prices expected to rise by 5.5% next year and in 2025, outpacing consumer price inflation forecasts of 5.1% and 4.8% for fiscal years 2023/24 and 2024/25, respectively. The Reserve Bank of India raised the repo rate by 250 basis points in this tightening cycle, with rates set to remain at 6.5% for the remainder of 2023 before starting to fall in early 2024. Despite affordability concerns, all analysts who answered an additional question said they were bullish about the housing market outlook. The luxury and high-end segments are witnessing increased traction, with future developments expected to drive overall home prices northward. Additionally, six analysts said the future of purchasing affordability for first-time homebuyers over the coming year would improve, while five said it would worsen.