Although affordability has declined from 2022 due to year-on-year (YoY) price increases and stable interest rates, most markets except Delhi-NCR and Bengaluru are expected to see improved affordability levels by 2025, JLL said in its report.
According to JLL’s Home Purchase Affordability Index (HPAI), home affordability is expected to improve with interest rate cuts projected on the horizon over the next 12 months. It added that Mumbai is on track to approach optimal affordability levels in 2025.
“Despite declining affordability from 2022 due to year-on-year (YoY) price increases and stable interest rates, most markets except Delhi-NCR and Bengaluru are expected to see improved affordability levels by 2025. A correction is currently expected with a cumulative 50 basis point cut forecast over the next few months,” JLL said in its report.
Mumbai is on its way to approaching optimal affordability levels in 2025. HPAI levels are likely to improve but remain lower than peak values in Delhi-NCR and southern markets. Kolkata is the most affordable residential market in India among the top seven cities and will maintain its position through 2024 and 2025 while hitting new affordability peaks next year, it added.
Samanthak Das, Chief Economist and Head of Research & REIS, India, JLL said, “While domestic economic forecasts show some softening in growth, India is still a global performer. Estimated to be a large economy, which supports household income growth. JLL’s HPAI shows that while 2021 saw the highest affordability across all markets, affordability levels declined through 2022 and 2023 due to rising prices and sticky interest rates.”
Expected interest rate cuts, along with moderate price growth and continued income growth, are expected to create a favorable environment for home buying in the next 12-18 months, with all cities except Bengaluru improving to the best levels since 2022. and Delhi NCR. Affordability in these two cities will also be better than the 2023 level, Das added.
With 2011 as the base year, Hyderabad leads the price growth with an increase of 132 per cent, followed by Bengaluru at 116 per cent and Delhi-NCR at 98 per cent. On the revenue front, Mumbai has seen the highest growth of 189 per cent, while Pune and Hyderabad have grown at 173 per cent and 163 per cent respectively over the same period.
Shivan Suraj, founder and director of Inframantra, a Gurugram-based property consulting firm, said, “Property price growth has not kept pace with income growth in Delhi-NCR, and this has impacted affordability in this market. A small rate cut will not affect the prices at which new supply is coming into this market. Delhi-NCR is an aspirational market with cities like Noida and Gurugram witnessing major changes in infrastructure and connectivity that are driving up prices.”
Residential sales are expected to reach an impressive 3,05,000-3,10,000 units by the end of 2024, with further growth expected in 2025, potentially making a new peak of 340,000-350,000 units, the report said.
Vijay Harsh Jha, founder and CEO of VS Realtors (I) Pvt Ltd, a Gurugram-based property brokerage firm, said, “Housing sales will witness record year-on-year growth in all markets and particularly in NCR. Noida International Airport and its surrounding infrastructure is driving a property boom in Noida that is catching up on lost years. Gurugram is developing into an aspirational city where not only offices but also working in them has become a matter of pride. As a result of this, new micro markets are emerging and demand is increasing.”
The report emphasizes that proactively managing affordability levels through policy interventions and improvements in household income will be key to sustaining demand resilience even in a positive price growth environment.