What is really worrying is that residential sales have declined during the last three quarters in a row. The down cycle started during the last festive quarter (October-December 2024), when, according to PropTiger.com sales fell sharply 26% YoY, compared to October-December 2023 period. During the January-March 2025 quarter, housing sales, as per Anarock, declined 28% from the year before period. The April-June 2025 quarter, has seen sales plunging by 20% YoY. as reported by Anarock. Paradoxically, housing prices rose despite sharp decline in sales. As per industry statistics, average residential prices increased 10% to 34% in Q1 2025. NCR saw a 27% YoY increase in prices in the April-June quarter. What's more, the mid-income and affordable homes saw sharper price increases compared to luxury housing. Even the surging sales in luxury and ultra-luxury housing have not been able to compensate for the huge dip in the sales of affordable and mid-priced homes, in turn resulting in an overall decline in sales.
Developers have been cashing in on the rising trend of ultra-rich shopping for trophy homes for wealth preservation. The ultra-HNIs snapped up upscale properties worth 25k crore in the last three years, according to real estate data analytics firm Zapkey.com while middle-class buyers were left in the lurch by developers due to non-supply of homes in the price category of INR 50 lakh-1 crore. According to a latest report by Knight Frank, 49% of all housing units sold across top 8 cities during January-June 2025, were in the premium category. In NCR 81% of all residential transactions comprised homes priced above 1 crore, followed by 70% in Bangalore. Interestingly, Mumbai, once unaffordable, turned out to be the most affordable market with just 36% of all homes sold in this price bracket. Across top cities, new launches in sub INR 50 lakh category fell 31% YoY.
That affordability has been severely hit, is clearly evident from the growing imbalance in EMI- salary ratio. Due to exceptionally high property prices and not very comfortable interest rates, home loan seekers are not able to follow the thumb rule of keeping EMIs under 40% of net monthly income. A recent National Housing Bank (NHB) report in this context is really alarming. According to NHB data, out of the 21 state capitals for which carpet area price data was computed, in 10 state capitals, it would require 30 years' savings to buy a house. This has in turn impacted home loan growth. According to the CRIF High Mark report, home loan growth in FY 25 fell 6.7%, compared to FY24, with home loan originations falling by 2 lakh to 34.7 lakh loans in FY 25. Even the 100 bps cut between February and June this year has not resulted in desired impact on boosting home loans and home sales.
This downtrend in housing also has to do with speculative selling which has been artificially hiking prices. Many developers are resorting to undesirable practices like EOI, pre-la, bulk selling with large discounts and subvention schemes. But some big branded well meaning developers have been largely keeping away from such practices. Bangalore-based Brigade Group, according to its MD, Pavitra Shankar has been discouraging speculative buying by refraining from offering subvention schemes ,not going for bulk selling and not waiving off transfer fee to discourage speculation. Another prominent developer, Prestige Group, as per its CMD, Irfan Razack is not aggressive in building something which is not viable for customers and does not resort to mass bookings to encourage genuine customers. According to him the way forward is to tailor products with right size and right pricing.
In the present scenario where big branded developers are cashing in on the growing demand for luxury homes while small and medium developers are struggling to sell, what is the way ahead for residential real estate. A lot will depend upon the home affordability-capital price growth and the macro-economic situation in view of global uncertainities. Presently, the fundamental economic indicators are favourable. But how the supporting economy and interest rates behave will depend on global geopolitical situation. RBI has more or less ruled out any further cut in interest rates this year though it has kept open the option of interest rate hike in view of adverse global scenario. Crisil estimates the price growth to be low (4-6%) over the medium term, compared to double-digit growth in FY24 and FY 25. It sees sale growth dropping by 2% in FY 26. A lot will depend upon improving affordability. Housing needs a two-pronged push- both on luxury and affordable housing front for a holistic growth. Further, ethical practices by developers and favourable policies to boost affordable housing (major contributor to housing sales) will be the key to the inclusive and sustainable growth of the housing sector.
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