India’s teetering real estate market will pick up again next year

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Workers work on the construction site of a building in Mumbai on May 11, 2009. REUTERS / Punit Paranjpe

BENGALURU, Aug.26 (Reuters) – India’s volatile real estate market will find its balance next year, boosted by a recovery from the pandemic and accommodating monetary policy, according to real estate analysts in a Reuters poll who were divided on this what that would mean for affordability.

The Aug. 11-24 poll predicted house prices would rise on average 2.5% nationwide this year, an improvement from nothing, 0.75%, expected in a poll three years ago. month.

But that forecast was significantly more modest than expectations of similar Reuters polls for most major housing markets, which are already up double-digit this year.

Average Indian home prices are expected to rise 4.5% next year and 5.5% in 2023, outpacing consumer price inflation, in part because raw material costs for builders are expected to rise. continue to increase.

“The trend in demand which remains strong can be attributed to several factors (…) low interest rates, an overall improvement in the labor market, an upturn in economic activity (…) and a desire growth in owning physical assets in times of unprecedented uncertainty, ”said Anuj Puri, President of ANAROCK Property Consultants.

“With the vaccination campaign gathering momentum and the spread of COVID-19 under better control at the moment, 2023 will most likely become the peak new year,” he said.

Reuters survey charts on the outlook for house prices in India:

India’s real estate industry has been hit hard during the COVID-19 pandemic, which has killed nearly 450,000 people and left millions unemployed, as it also triggered a huge migration of workers, many of whom are from construction projects. construction. Read more

Thousands of these projects have been stalled, and activity in the once-booming housing market in Asia’s third-largest economy has slowed significantly.

If the latest Indian home price hikes come true, it could put pressure on homebuyers at a time when many are struggling to find jobs as the economy has still not recovered to its level. before COVID-19.

Analysts were divided, however, on what would happen to affordability over the next several years.

Seven of 13 analysts who answered a separate question said affordability would improve over the next two to three years, but almost as many said it would stay the same or get worse.

“Housing affordability can suffer from the combined effect of rising construction costs being passed on to the consumer, falling vacancy rates and rising interest rates,” said Ramesh Nair, CEO of Necklaces for India.

Likewise, any disruption and downward movement in the economic recovery due to a third wave of COVID-19 is also likely to affect housing demand and supply.

A spread of new coronavirus variants, a slowdown in economic activity and higher interest rates were the main downside risks to the outlook, according to those interviewed in the poll.

Reuters survey charts on the outlook for the Indian real estate market:

Despite retail price inflation exceeding its mid-term target midpoint for around two years, the Reserve Bank of India has chosen to support economic growth with low rates after cumulative declines of 115 basis points in its key rate at 4.0% since the pandemic began.

Another Reuters poll last month showed the RBI would make two 25 basis point hikes next year, taking it to 4.5%.

(For more articles from Reuters quarterly housing market surveys:)

Reporting by Indradip Ghosh; Poll by Sarupya Ganguly and Prerana Bhat; Editing by Ross Finley and Steve Orlofsky

Our Standards: The Thomson Reuters Trust Principles.


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