The Indian real estate market is bracing for significant price hikes in the coming years, exacerbating an already critical affordable housing crisis. Despite robust economic growth, the sector faces challenges in balancing demand from affluent buyers with the pressing need for accessible housing options.

Projected Price Increases

Home prices in major Indian cities are expected to see substantial increases:

These projections indicate a steeper rise in property values than previously anticipated, potentially widening the affordability gap for many prospective homeowners.

Economic Growth vs. Housing Affordability

India's economy showcased impressive growth, expanding by 7.80% in the last quarter. However, this economic boom has not translated into improved housing affordability:

• Demand from affluent buyers is outpacing supply
• Affordable housing remains scarce
• Knight Frank estimates a shortfall of 10 million affordable homes
• The affordable housing deficit could potentially triple by 2030

Interest Rates and Market Dynamics

The Reserve Bank of India (RBI) has taken steps to address the situation:

• Interest rates cut by 100 basis points to 5.50%
• However, experts argue this provides insufficient relief

Despite the rate cut, home prices continue to rise at a national rate of 7-8%, offsetting potential benefits for buyers.

Rental Market Pressure

As home ownership becomes increasingly challenging:

• Urban rents are expected to climb 5-8% over the coming year
• This trend further squeezes those unable to enter the property market

Divided Opinions on Future Affordability

Property experts are split on whether the situation will improve:

• 10 out of 19 survey respondents expect improvement in affordability
• 9 anticipate worsening conditions

Shifting Demographics of Home Ownership

Real estate research reveals a concerning trend:

• The qualifying age for property purchase has risen from 30-40 years to 45 years
• This shift is attributed to reduced affordability in the market

The Indian real estate sector finds itself at a crossroads, balancing economic growth with the need for accessible housing. As prices continue to rise and affordability remains a challenge, stakeholders will need to work together to address the growing crisis in affordable housing to ensure a sustainable and inclusive property market for all segments of society.

The Indian real estate sector is experiencing significant growth across various segments, according to a recent report by Equirus Capital. The study highlights strong momentum in residential, commercial, retail, hospitality, and Special Economic Zone (SEZ) segments, driven by rapid urbanization and steady investments.

Commercial Space Demand Surges

The demand for commercial space in India's top eight cities is projected to grow at an impressive 11% Compound Annual Growth Rate (CAGR) between 2020 and 2025. The report indicates that commercial space absorption is expected to increase from 39.3 million square feet in 2020 to 66.4 million square feet by 2025, showcasing the robust growth in the sector.

Bengaluru: A Global Leader in Office Space Absorption

Bengaluru has emerged as a frontrunner in the global office space market, outperforming major international cities. The southern Indian metropolis absorbed a staggering 75.2 million square feet of office space from CY16 to 9MCY24. This performance is particularly impressive when compared to other global financial hubs:

The negative figures for New York and London indicate a contraction in office space absorption, further highlighting Bengaluru's remarkable growth.

Competitive Rental Pricing

Indian cities offer significantly lower rental prices compared to other major global markets, making them attractive destinations for businesses. As of Q3CY24, the office rental rates in key cities are as follows:

The competitive pricing in Indian cities, particularly Bengaluru and Mumbai, presents a significant cost advantage for companies looking to establish or expand their operations.

Cost-Effective Operations

Bengaluru stands out not only in terms of office space absorption but also in operational costs. The city's operating costs are 81% lower than Tier-II cities in the United States. The cost per Full-Time Equivalent (FTE) in Bengaluru is just 19, compared to 100 for US Tier-II cities. This substantial cost difference makes Bengaluru an attractive destination for Business Process Management (BPM) operations and multinational corporations seeking to optimize their operational expenses.

The combination of robust growth, competitive pricing, and cost-effective operations positions India's real estate sector, particularly its commercial segment, as a promising market for both domestic and international investors. As urbanization continues and investments remain steady, the sector is poised for further expansion across its various segments.