07/04/2025
India’s housing market is experiencing significant growth, with home prices projected to rise by 6.5% in 2025, fueled by strong demand, particularly in the luxury segment. The sector is on track to reach $1 trillion (Rs. 1 lakh crore) by 2030, reflecting long-term investor confidence. However, despite the housing boom, India’s GDP growth is expected to slow to 13%, marking the slowest expansion in four years.
Major metropolitan cities such as Mumbai and Bangalore are projected to yield 15-16% annual returns for investors by 2030. A strong GDP historically correlates with higher property prices, as economic expansion leads to job creation, rising incomes, and increased consumer confidence. However, 2025 is expected to be a challenging year for the housing market due to stubbornly high home prices and mortgage rates, which are making affordability a concern for many buyers. While the post-pandemic home price surge has lost momentum, prices remain elevated in some markets, particularly in prime urban areas, and are unlikely to see drastic corrections anytime soon.
Government’s Role and Policy Impact
The Union Budget 2025-26 has emphasized infrastructure growth, along with relief for the middle class, support for domestic manufacturing, and job creation, all of which are expected to indirectly boost the housing sector. Additionally, a 50-basis-point (bps) interest rate cut projected over the next 12 months is anticipated to improve housing affordability. A JLL India study found that while affordability has declined year-on-year since 2022 due to rising property prices and stagnant interest rates, most markets are expected to see improved affordability in 2025, with the exception of Delhi NCR and Bengaluru.
If the expected 50 bps repo rate cut materializes, it could reduce borrowing costs, making homeownership more accessible. Mumbai and Pune are likely to approach peak affordability levels by 2025, while Kolkata is expected to remain the most affordable major city. In contrast, Delhi NCR and South Indian metros like Bengaluru, Hyderabad, and Chennai will witness gradual affordability improvements, but home prices are unlikely to return to previous lows.
Peripheral Markets Leading Price Growth
The real estate growth trend has shifted towards peripheral micro-markets around metro cities, where property prices have surged more than in prime locations. According to Anarock data, peripheral areas in top cities have recorded higher price appreciation due to greater scope for future growth.
Bengaluru’s Gunjur saw a 69% price increase from Rs. 5,030 per sq ft in 2019 to Rs. 8,500 per sq ft in Q3 2024. Meanwhile, the prime area Thannisandra Main Road saw a 62% price rise, from Rs. 5,175 per sq ft to Rs. 8,400 per sq ft.
NCR’s Noida Expressway recorded a 66% rise in residential prices over the past six years, from Rs. 5,075 per sq ft in 2019 to Rs. 8,400 per sq ft in Q3 2024.
Dwarka Expressway (NCR) saw the highest increase at 93%, from Rs. 5,359 per sq ft in 2019 to Rs. 10,350 per sq ft in Q3 2024.
Mumbai Metropolitan Region (MMR): Panvel’s property prices surged by 58%, while prime area Worli saw a 37% increase.
Pune’s Wagholi (peripheral market) experienced 37% price growth, compared to Wakad’s (prime area) 27% increase.
Housing Market Trends and Affordability Challenges
A Reuters survey found that India’s average home prices will rise steadily over the next few years, primarily due to demand from wealthy individuals. After a 4.3% increase in 2024, home prices are expected to rise by 6.5% in 2025 and 7.5% in 2026. However, this growth comes at a cost, as the rising cost of living makes homeownership unattainable for many buyers, particularly in urban centers.
While investors continue to capitalize on strong returns, prospective homeowners may struggle with high mortgage rates and rising property values. With home prices still significantly above pre-pandemic levels, buyers who have been waiting for prices to cool off may continue to face limited affordability in 2025.
Conclusion
India’s real estate market is set for continued expansion, supported by strong demand, infrastructure growth, and policy measures. While luxury housing and peripheral markets are experiencing rapid price growth, affordability remains a challenge due to rising property prices and borrowing costs. The expected interest rate cuts in 2025 may ease affordability constraints, but prospective buyers will still need to navigate high prices, strong demand, and shifting market dynamics.