New Delhi [India], November 27 : India's residential real estate market could see an increase in affordability shift, driven by anticipated interest rate cuts by the Reserve Bank of India (RBI), a report by JLL said.
A cumulative 50 basis point (bps) rate cut decision over time will bring relief to homebuyers, reversing the affordability challenges caused by stagnant interest rates and rising property prices since 2022.
According to JLL's Home Purchase Affordability Index (HPAI), the reduction in repo rates over the next few months could enhance affordability in most housing markets by 2025, except for Delhi NCR and Bengaluru.
While Kolkata is set to maintain its position as the most affordable market, with potential affordability peaks, cities like Mumbai and Pune are expected to approach optimal levels.
According to the report, the residential market is currently experiencing a sustained bull run, driven by evolving homeownership dynamics. This momentum has led to consecutive peaks in sales and an acceleration in project launches.
Residential sales are expected to reach an impressive 305,000-310,000 units in 2024, with further growth expected in 2025, potentially creating a new peak at 340,000-350,000 units, as per JLL.
The report further added that while a rate cut before the end of 2024 is uncertain, experts anticipate a total reduction of 50 bps within the next 12 months.
This monetary easing is expected to lower borrowing costs across the economy, benefiting homebuyers and developers alike, the report added.
Mumbai and Pune are projected to approach near-peak affordability levels by 2025, while Kolkata is expected to maintain its status as India's most affordable market among the major cities, potentially hitting new affordability peaks, as per the report.
Meanwhile, Delhi NCR and southern markets like Bengaluru, Hyderabad, and Chennai are likely to see improved affordability levels on a YOY basis as well, although remaining below their peak values.
"The anticipated interest rate reduction, combined with moderate price growth and sustained income increases, are expected to create a conducive environment for home purchases over the next 12-18 months with affordability levels set to improve to their best since 2022 for all cities. This will maintain buoyancy in homebuyer behaviour with market activity expected to have a long and resilient runway, even with continued," said Dr. Samantak Das, Chief Economist and Head of Research and REIS, India, JLL.
With 2011 as the base year, Hyderabad leads in price growth with a 132 per cent increase, followed by Bengaluru at 116 per cent and Delhi NCR at 98 per cent, as per the report. On the income front, Mumbai has seen the highest growth at 189 per cent, with Pune and Hyderabad following at 173 per cent and 163 per cent, respectively, over the same period, it added.
"The combination of healthy income growth, potential interest rate reductions, and moderating price growth is expected to improve affordability levels over the next 12 months, paving the way for sustained market activity and continued strong performance in India's residential real estate sector in the medium term," said Siva Krishnan, Senior Managing Director (Chennai & Coimbatore), Head - Residential Services, India. JLL.
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