Property prices rise across cities fuelled by demand, costs, rental yields
Residential prices have moved up 2-19 per cent in 2024 so far and according to a survey homebuyers expect prices to rise 6-15 per cent on an average over the next one year or so.
A survey by real estate platform Magicbricks showed that a major portion of homebuyers are expecting prices to rise over the next 12 months driven by demand, leading to capital appreciation while rents have also increased. The opportunity for capital appreciation on their investment as well as higher rental yields is fuelling further demand.
A major reason for the spike in prices is also due to higher construction costs.
Data from Knight Frank India shows that residential prices have been consistently rising across cities throughout the year. During the first half of calendar 2024 they increased 1-9 per cent on an average and then in the September quarter they rose another 1-10 per cent, in both cases Bengaluru showing the most increase.
Lodha Developers, one of the top selling real estate players, has been consistently raising prices by 6-7 per cent across its projects and has kept to its strategy of keeping price hikes a couple of percentage points below wage increases in order not to dent affordability.
The National Capital Region, where land is scarce and dominated by a few developers, has seen prices go up by 7 per cent this year so far. But there are pockets, which has seen steep appreciation such as Gurugram with 76 per cent increase in two years. In the September quarter alone prices have surged over 15 per cent sequentially. The price increase has happened despite a moderate increase in demand and higher growth in supply.
Price growth
In a recent call with analysts the management of Godrej Properties, which has a pan-India presence, noted the price growth across markets such as NCR (Gurgaon and Noida) and Bengaluru.
Mumbai, which has been resistant to price changes primarily because real estate prices are already inflated, has also seen prices going up. “We are seeing price growth momentum in our portfolio,” said Godrej Properties CEO and MD Gaurav Pandey with respect to Mumbai, adding that it would see good price growth going forward.
He pointed out that land was scarce in Noida fueling the price increase, which was likely to see further growth in the near term. In Bengaluru there was also a challenge due to the issue of clear titles on land and projects being launched are being priced higher. He forecast Bengaluru to see high single digit growth in the next 6-12 months.
“While we’ve observed significant price increases, especially in the prime localities of metro and mini metros, it’s crucial to view these developments through a wider lens of India’s economic growth trajectory and urbanisation patterns,” said Vikas Wadhawan, CFO, REA India & Business Head, PropTiger.com, while releasing a report last week on property prices.
“The current market dynamics, characterised by a nuanced demand-supply equation, are creating a more stable and sustainable environment for long-term growth. As we navigate through this phase, we anticipate a gradual alignment of buyer expectations with the new price realities,” he added.
