Between January and December 2024, some 3.5 lakh houses were sold in India’s top eight markets, touching a 12-year high. Residential sales were up 7 per cent from a year ago, with sales in Hyderabad and Pune touching an all-time high, and sales in Mumbai touching a 13-year high, according to consulting firm Knight Frank India.
Over the past few years, a surge in demand for premium homes has been a driver for the housing market. Houses priced between Rs2 crore and Rs5 crore have seen an 85 per cent year-on-year jump in sales. “The premiumisation trend has intensified as the market continues to shift toward the higher ticket-sizes with products better suited to the lifestyle needs of the consumer,” said Shishir Baijal, chairman and managing director of Knight Frank India.
However, the affordable segment, especially under Rs50 lakh, has slowed down. This mirrors the sluggish demand in other areas of the economy such as the entry-level car market and FMCG. High inflation, high food prices, and low wage hikes and increments have pinched the wallets of the lower- and middle-income households. High interest rates, too, hurt.
With inflation staying well above its target for much of 2024, the Reserve Bank left its benchmark lending rate unchanged for 6.50 per cent through the year. It reduced the repo rate by 25 basis points on February 7, though, in the first cut in almost five years.
Demand challenges are not the only issue. Limited urban land availability and escalating prices also make it difficult for developers to achieve the required balance of affordability and profitability, said Prashant Sharma, president of NAREDCO (National Real Estate Development Council) Maharashtra.
Industry experts have called for a holistic approach to revive the affordable housing market, both on the demand and the supply side. “Streamlined approval processes, single-window clearances, and targeted fiscal incentives such as GST reductions for affordable homes can make a significant impact,” said Sharma.
In the Union Budget, Finance Minister Nirmala Sitharaman announced significant income tax relief for India’s middle class. Those earning up to Rs12 lakh will not have to pay any income tax, and tax slabs were revised―income tax for those earning between Rs12 lakh-Rs24 lakh will be lower in the new tax regime.
This is expected to give the housing market, especially in the affordable segment, a boost. The repo rate cut, which will lower interest rates a bit, should also help.