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The Collection Wed, 29 Jan 25 |
Multiple stories, multiple perspectives, one theme worth your time—every week. |
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Sentiments in India’s stock markets have soured distinctly in the past few weeks. And one sector, in particular, has felt the pinch acutely.
The Nifty Realty Index, which tracks companies involved in real-estate construction, recorded a fall of over 20% in the month leading up to 27 January, when the broader Nifty 50 dipped by only 4%.
This is a correction that wasn’t entirely unexpected, per stock market analysts, given the sector was the top performer in the bourses in 2023 and 2024. But the new year dawned with a piece of news that likely explains just how steep the fall has been.
For the first time since the pandemic, annual housing sales in India declined year-on-year in 2024. Much of that is due to the sharp increase in prices that the country’s overall housing market has seen in the past few years—a trend that has made homeownership increasingly unattainable to a great many people.
Just this week, realty consultant Anarock’s chairman Anuj Puri wrote about why there was a strong case for Union Budget measures to revive affordable housing.
“In a fairly short time (after the pandemic), the once robust supply of affordable housing tottered and dwindled. Its total supply share reduced from 40% in 2018 to 16% in 2024. The target clientele, consisting of blue-collar workers, lower-paid workforces and those just starting out in their careers, were severely cash-strapped and obviously, buying homes did not feature among their immediate priorities.
[…]
Any substantial announcement for the affordable housing segment in the upcoming Union Budget can strengthen the trend and give affordable housing a seriously needed leg-up.”
Ask Rounak Kumar Gunjan, The Ken’s resident writer on real estate, and he’ll tell you the market goes through cycles: “It’s almost a seven- to eight-year cycle, where for a few years, prices keep going up. Then there’s a sort of a correction.”
So is the beating realty stocks are taking right now an indicator that we are on the cusp of a housing-price correction?
The Ken has been documenting and reporting on these price movements and their implications for homebuyers for years. In this week’s edition of The Collection, let’s explore how we got here and what that may say about where we’re headed.
If you have any thoughts, feedback, or ideas for this newsletter, please write to me at [email protected].
Divergence
India’s housing story over the last few years has had two very different trajectories play out on opposite ends of the market.
Between 2009 and 2014, overall property prices shot up sharply—around 30–120% across India’s major cities. But things changed in 2014, when there was a fundamental shift.
“From a price-driven, speculator-oriented market, Indian real estate became a more production-driven, customer-oriented market from 2014, says Pankaj Kapoor, managing director of real estate research firm Liases Foras.”
Almost but not yet: millennials’ homeowning dreams vs Indian real estate, July 2022, The Ken
A certain kind of stability was ushered in, and with it, homes became more affordable—thanks to stable, low interest-rate regimes and moderate prices.
That was the case until 2022, when we reached the end of the pandemic and things swung back into speculation territory.
Between August 2022 and 2024, property prices across India’s top eight cities spiked by more than 30%, over double the growth rate in the preceding two years, according to a report by Magicbricks. It was an increase that outpaced nominal per-capita income growth in many of India’s largest cities.
We’ve also seen a slowing in the offtake of home loans, a primary driver of housing purchases. Outstanding home loans jumped 40% in the year leading to November 2023, but this slowed to 12% in the following year.
Luxury housing was doing just fine, but as my colleague Rounak wrote in one of our first stories this year, behind all the celebratory quotes and statements is the increasingly evident fact that things are significantly worse at the other end of the market.
Behind the luxury drumbeating, a housing-affordability crisis looms
Property prices across Indian cities shot up nearly 30% in the last two years; higher than the growth in nominal per-capita income
Since the pandemic, the Indian market has seen the share of affordable homes—costing less than Rs 50 lakh (US$60,000)—shrink, while that of luxury homes, which cost more than Rs 1 crore (US$120,000), has increased.
Interest rates started going up in 2022, but this didn’t put much of a brake on luxury home purchases. My colleague Anand Kalyanaraman, The Ken’s finance editor, examined the trend in a longform feature in December 2023.
This is no time to buy a luxury house, so why are homebuyers doing just that?
Luxury homes are gaining ground at the expense of affordable ones. With little respite on prices, the cost weighs heavily on many buyers
This premiumisation meant average prices across cities shot up. In Delhi-NCR, sky-high prices made even the well-heeled feel broke. In the first half of 2024, over 60% of new launches in the region cost over Rs 2.5 crore, per a report by Anarock. For Hyderabad and Mumbai, the figures were 22% and 12%.
There are a few reasons why Delhi-NCR’s prices remain an anomaly even given the broader upward trend. If you are curious, you should read Rounak’s excellent piece from September on why.
What happens when you bring Rs 2 crore to the Delhi-NCR house hunt?
Young Indians are leading the premium housing boom in major cities, but Delhi-NCR’s sky-high prices are making even the well-off feel broke
But the “premiumisation” hasn’t just infected general housing.
For instance, senior living spaces have seen pretty steep increases, with many such homes now commanding a 10–15% premium over regular residential spaces. Of course, nearly two-fifths of the elderly population in India can’t afford to live in such homes.
We explored how real-estate companies zeroed in on the senior living segment, and what it would take to build truly affordable homes for India’s rising senior population in this February 2024 story.
How retirement homes became a sudden hit with the real-estate industry
The demand for senior living homes has outstripped supply by at least twenty times. And the lack of affordability is forcing real estate companies to innovate offerings
Average rentals have also gone up by nearly 30% in the last two years. Enough to put the spotlight on the age-old debate over whether renting a home is a better option than buying one.
We’ve explored the buy-vs-rent conundrum, especially for young Indians, in both podcast and story form:
Roti ✓ Kapda ✓ Makaan? Should young Indians still believe in the home ownership dream?
Almost but not yet: millennials’ homeowning dreams vs Indian real estate
With the Union Budget just a couple days away, and a meeting of the Reserve Bank of India’s Monetary Policy Committee (which sets interest rates) slated for the first week of February, will we see measures to prop up India’s spiralling housing market?
Given how things stand, I don’t think anyone would complain if we do.
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Rahul leads the promotion and distribution efforts for the journalism produced by The Ken. He works at the intersection of the publication's editorial and business operations.
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