Construction Industry News
Real estate prices in India are expected to rise 7.5% this year on a pan-Indian basis, the fastest growth in five years.
Average house prices were expected to rise by 6% next year and in 2024. In May 11-27, a poll was conducted among 13 real estate analysts. In a March poll, analysts predicted 5.0% growth this year.
The Bombay Stock Exchange (BSE) index of real estate companies is up 21% over the past year, outperforming the 15% in the broader Sensex.
According to the Reuters poll, prices in Mumbai and Delhi, including the surrounding National Capital Region, are expected to grow between 4% and 5% this year and next. Prices in Bengaluru and Chennai are expected to rise 5.5%-6.5% over the next two years.
Improving housing demand and rising building material prices are some of the main factors driving housing costs up.
However, analysts warned that higher interest rates could weigh on affordability, especially for first-time buyers.
Earlier this month, the Reserve Bank of India (RBI) raised its benchmark repo rate - the rate at which it lends to banks - by 40 basis points to 4.40% in its first rate hike in about four years. Economists predict that the central bank will advance more aggressive interest rate growth in its bid to tame high inflation.
The Indian housing sector has broadly benefited from low interest rates over the past two years. This policy rate hike will lead to higher EMIs for home loans. However, it is believed that improved homebuyer attitudes, a preference for owning a home and strong wage increases will continue to help the housing market. The stance of monetary policy is still supportive, and with the pandemic and economic growth receding, said Gulam Zia, Senior Executive Director of Knight Frank India.
If interest rates rise quite sharply, analysts are warning that many first-time homeowners would choose to rent instead.
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