BENGALURU: According to a Reuters poll of property experts, India's house prices will rise steadily over the next few years, roughly in line with overall economic growth, with little chance of a significant slowdown in the coming year.
The findings highlight how the housing market, which employs roughly 1.4 billion people, is likely to remain a stable contributor to growth in Asia's third-largest economy in the future.
According to a Nov. 9-Dec. 1 poll of 11 property market experts, average house prices in India are expected to rise 5.0% over the next three years, trailing the current consumer price inflation rate, after increasing by 7% in 2022.
Forecasts for 2023 ranged widely from 1% to 13%.
But the outlook for India was relatively stable compared with key housing markets in developed economies, where prices are mostly predicted to slump after a pandemic-driven boom as central banks raise rates aggressively.
"The growth trajectory is definitely poised towards the upside, but expectations of rising interest rates, which may act as a momentary disruptor to demand, may see developers easing up on price increases in 2023," noted Rohan Sharma, senior director at JLL Research.
The Reserve Bank of India has also raised its repo rate, now at 5.90%, several times this year since May, by 190 basis points in total, with a few more hikes likely before a pause.
Relatively modest interest rate risk partly explains why all but one of 10 analysts who answered an additional question said the chances of a significant slowdown in the housing market over the coming year were low.
A regional breakdown of the latest Reuters poll data showed prices in Bengaluru, Mumbai, Delhi and Chennai were also forecast to rise by a median of 5%-6% over the coming three years, in line with the national average.
A steady increase in house prices - which have risen by nearly double over the past decade - has worsened affordability, dimming hopes of many aspiring first-time buyers of owning a house.
House prices would need to fall by a median of just 6.25% from peak to trough to make them affordable, according to the median response to an additional question, with the highest estimate at 17.5%.
Nine of 11 respondents said either an economic slowdown or rising rates would be the biggest challenge for first-time homebuyers.
"While India ... has been quite resilient amidst global disturbances, the chances of a slowdown in India cannot be ruled out," said Anuj Puri, chairman of ANAROCK Property Consultants.
"If jobs are impacted, the apportion towards real estate purchases could potentially decline."
Source: Reuters