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India's wobbling housing market to regain its feet next year - Reuters Poll

India's wobbling housing market to regain its feet next year - Reuters Poll

FILE PHOTO: Trucks are parked at the site of an under-construction residential building project, which has been stalled, in Mumbai March 19, 2015. REUTERS/Danish Siddiqui

BENGALURU : India's wobbly housing market will find its footing next year, boosted by a recovery from the pandemic and easy monetary policy, according to property analysts in a Reuters poll who were split on what that would mean for affordability.

The Aug. 11-24 poll predicted house prices would grow on average 2.5per cent nationwide this year, an upgrade from next to nothing, 0.75per cent, expected in a survey three months ago.

But that forecast was significantly more modest than expectations in similar Reuters polls for most major housing markets, which are already up in double digits this year.

Average Indian house prices were forecast to rise 4.5per cent next year and 5.5per cent in 2023, outstripping consumer price inflation by then, partly because raw material costs for builders are due to keep rising.

"The trend of demand remaining buoyant can be attributed to several factors ... sustained low interest rates, an overall improvement in the job market, resumed economic activity ... and an increasing desire to own physical assets during times of unprecedented uncertainty," said Anuj Puri, chairman at ANAROCK Property Consultants.

"With the vaccination drive gaining significant momentum and the spread of COVID-19 under better control for now, 2023 will very likely emerge as the new peak year," he said.

Reuters poll graphics on the India house prices outlook:

To view the graphic, click here: https://fingfx.thomsonreuters.com/gfx/polling/xmvjoojoqpr/INper cent20housingper cent20Augper cent20finalper cent202021.PNG

The Indian real estate industry has taken a big hit during the COVID-19 pandemic, which has killed nearly 450,000 people and left millions jobless, as it also triggered a huge migration of workers, many from construction projects.

Thousands of such projects were stalled and once-booming housing market activity in Asia's third-largest economy slowed significantly.

If the latest forecasts for Indian house price rises are realised, it could put pressure on home buyers at a time when many are struggling to find jobs given the economy has still not recovered to its pre-COVID-19 level.

Analysts were split, however, on what would happen to affordability over the coming years.

Seven of 13 analysts who replied to a separate question said affordability would improve over the next two to three years, but almost as many said it would stay the same or worsen.

"Housing affordability may suffer as a combined result of increased costs of construction being transferred to the consumer, lower vacancy levels and increase in interest rates," said Ramesh Nair, CEO-India at Colliers.

"Similarly, any disruptions and downward movements in economic recovery owing to a third wave of COVID-19 are also likely to affect housing demand and supply."

A spread in new coronavirus variants, a slowdown in economic activity and higher interest rates were the biggest downside risks to the outlook, according to respondents in the poll.

Reuters poll graphics on the India housing market outlook:

To view the graphic, click here: https://fingfx.thomsonreuters.com/gfx/polling/myvmnnjnypr/Indiaper cent20Housingper cent20EQsper cent20(2).png

Despite retail inflation running above its medium-term target mid-point for about two years, the Reserve Bank of India has opted to support economic growth through low rates after cumulative cuts of 115 basis points to its key repo rate to 4.0per cent since the pandemic started.

A separate Reuters poll last month showed the RBI would make two 25 basis-point hikes next fiscal year, taking it to 4.5per cent.

(For other stories from the Reuters quarterly housing market polls:)

(Reporting by Indradip Ghosh; Polling by Sarupya Ganguly and Prerana Bhat; Editing by Ross Finley and Steve Orlofsky)

Source: Reuters

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