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Rising home prices in the Indian real estate sector have had a major impact on the budgets of the middle class and new home buyers. According to PropTiger’s latest ‘Real Insight Residential’ report, the sales-weighted average price of homes in the top 8 major cities of the country has reached a new record high of ₹10,153 per square foot. This is the second consecutive quarter when the average property rate in major markets of the country has remained above ₹10,000 per square foot. However, due to increasingly expensive properties, high loan rates and layoffs in the IT sector, total home sales have declined by 6.1% year-on-year in the second quarter of the current financial year and total sales have come down to 91,729 units.
Main reasons for increasing property prices and decreasing sales
According to real estate analysts, rising land costs and demand for premium housing projects have led developers to continuously raise prices in the last two years. While strong buying continues in the luxury and ultra-luxury segments, the affordable and mid-income housing segments with budgets below ₹ 1 crore have seen buyers withdraw. Artificial Intelligence (AI) based automation, workforce restructuring in tech companies and the uncertain economic environment have impacted the sentiment of IT professionals and first-time home buyers.
In which city how much did sales fall and where did demand increase?
The sales trend has been mixed in different real estate markets of the country:
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Biggest decline in Pune and Ahmedabad: The sharpest decline of 20.8% was recorded in housing sales in Pune, where sales dropped to 12,642 units. In Ahmedabad too, sales fell by 20.2% to 7,541 units.
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Bengaluru, Delhi-NCR and Mumbai (MMR): Home sales in the country’s IT hub Bengaluru declined by 9.2%. Along with this, both the major markets of Delhi-NCR and Mumbai Metropolitan Region (MMR) recorded a decline of 7% on an annual basis.
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Strength seen in Chennai and Hyderabad: Bucking the trend, Chennai witnessed a strong 36% jump in sales due to new projects and strong demand. In Hyderabad too, residential sales increased by 14.6% to 13,196 units.
Mumbai is most expensive in terms of prices, fastest rise in Bengaluru
Despite the slowdown in sales, property prices have not come down. Mumbai (MMR) remains the most expensive housing market in the country, with the average rate reaching ₹15,422 per sq ft. Whereas in Bengaluru, a huge increase of 26% was recorded in the prices on annual basis and the average price there has become ₹ 9,931 per square foot. In Pune too, property prices crossed the ₹8,000 mark for the first time and touched ₹8,084 per square foot. On the other hand, Ahmedabad still remains the most affordable market among the top eight cities at ₹5,295 per square foot.
Buyers’ trend is shifting in Tier-2 and Tier-3 cities
With per square foot rates crossing ₹10,000 in metro cities, many middle-class buyers and investors are now moving to tier-2 and tier-3 cities like Lucknow, Kanpur, Jaipur, Indore, Chandigarh and Kochi. Due to better infrastructure, metro connectivity and expressway development in these emerging cities, quality homes are available in the range of ₹4,000 to ₹6,500 per square foot, giving a big boost to the local real estate markets.
Affordability will become the biggest challenge in the upcoming festive season
Real estate developers have high expectations about the upcoming festive season (Ganesh Chaturthi, Navratri and Diwali), as special discounts, no-EMI offers and flexible payment plans are offered by developers during this period. However, experts say that unless there is a reduction in construction costs and price correction in the affordable segment, buying a house will remain a big challenge for the middle class.