India’s housing market is undergoing a significant transformation, marked by a decisive shift towards premium properties while the affordable housing segment faces considerable headwinds. According to the latest findings from property consultant Knight Frank India, the real estate landscape is being reshaped by evolving consumer preferences and economic factors. While Hyderabad continues its impressive growth and Mumbai holds its ground as a resilient market, the National Capital Region (NCR) is experiencing more modest growth. This blog delves into the city-wise winners and losers and analyses the overarching trend of premiumisation in the Indian real estate sector.
The Unstoppable Rise of Premium Housing
The most striking trend in the residential market is the remarkable surge in demand for high-end homes. Properties priced above Rs 1 crore are no longer a niche segment; they have firmly entered the mainstream. In 2023, the share of homes in this category jumped to 35% of total sales across the top eight cities, a significant leap from just 21% in 2021. This trend has continued to strengthen in 2024.
Several factors are fuelling this premiumisation wave:
- Increased Disposable Income: A growing class of affluent homebuyers with higher disposable incomes is seeking upgraded lifestyles.
- Desire for Better Amenities: The post-pandemic world has amplified the need for larger living spaces, home offices, and access to premium amenities like clubhouses, green spaces, and advanced security.
- Strong Investment Appeal: Premium properties in prime locations are seen as stable, appreciating assets, attracting significant investor interest.
This shift indicates a maturing market where buyers are willing to pay a premium for quality, space, and a superior living experience. Developers have responded promptly, launching more projects in the high-end category to meet this escalating demand.
The Affordable Housing Conundrum
In stark contrast to the boom in the premium segment, affordable housing—defined as homes priced under Rs 50 lakh—is grappling with a significant decline. The share of this segment in total sales has shrunk from 40% in 2021 to just 26% in early 2024. This slowdown is a cause for concern as it impacts a large segment of the population.
The core issues behind this decline include:
- Rising Input Costs: Increased prices of essential raw materials like steel and cement have pushed up construction costs, making it difficult for developers to maintain affordable price points.
- Land Scarcity: The high cost and scarcity of land in major urban centers add to the financial pressure on developers.
- Economic Pressures on Target Buyers: The entry-level homebuyer segment has been more affected by inflation and rising interest rates, dampening their purchasing power.
Experts suggest that a renewed policy focus, perhaps through developer incentives or interest subvention schemes for buyers, is necessary to reinvigorate this vital segment. Without such support, the gap between the premium and affordable markets may continue to widen. For more detailed statistics and analysis, you can refer to reports from major property consultants like Knight Frank India.
City-Wise Deep Dive: Winners and Losers
The national trends of premiumisation and affordable housing decline are playing out differently across India’s major metropolitan areas.
Hyderabad: The Star Performer
Hyderabad has cemented its position as one of India’s fastest-growing residential markets. The city has witnessed robust sales growth, driven by its booming IT and pharmaceutical sectors, which create high-paying jobs. Coupled with significant infrastructure upgrades and relatively better affordability in its premium segment compared to Mumbai, Hyderabad remains a top choice for both end-users and investors.
Mumbai (MMR): The Resilient Giant
The Mumbai Metropolitan Region (MMR) continues to be the largest market by sales volume. Despite having the highest property values in the country, demand remains consistently strong. The luxury and premium segments, in particular, drive the market, with high-profile launches and record-breaking transactions becoming commonplace. Mumbai’s status as India’s financial capital ensures that it holds firm, demonstrating remarkable resilience against market fluctuations.
NCR: A Market of Modest Growth
The National Capital Region (NCR) has shown more moderate performance compared to other major hubs. While overall sales have grown, the pace has been slower. The market here is more fragmented, with certain micro-markets like Gurugram showing strong premium demand while others face challenges of oversupply. However, ongoing infrastructure projects like the Jewar Airport and improved connectivity are expected to provide a fresh impetus for growth in the coming years, as noted by sources like The Economic Times.
What This Means for the Future
The Indian housing market is at a crossroads. The clear pivot to premium housing reflects a fundamental change in buyer aspirations and economic capacity. For homebuyers, this means more choices and better products in the higher-end brackets, but significant challenges for those seeking affordable options.
For developers, the message is clear: the demand for quality, space, and well-designed projects is paramount. However, the industry and policymakers must collaborate to find sustainable solutions to revive the affordable housing segment, ensuring that the dream of homeownership remains accessible to all.
Frequently Asked Questions (FAQs)
1. Why is premium housing demand increasing in India?
The demand for premium housing (properties over Rs 1 crore) is rising due to increased purchasing power among high-income professionals, a post-pandemic preference for larger homes with better amenities, and the recognition of premium real estate as a strong investment asset.
2. What is causing the decline in the affordable housing sector?
The affordable housing sector is declining primarily due to a combination of rising construction material costs, high land prices in urban areas, and the waning of government-led interest subvention schemes. These factors make it financially challenging for developers to build and for the target demographic to buy.
3. Which city showed the most robust growth in the Indian housing market?
Hyderabad has consistently shown some of the most robust growth among major Indian cities. Its thriving job market in the IT and pharma sectors, combined with major infrastructure development, has made it a hotspot for real estate investment and residential sales.
4. Is now a good time to buy a home in India despite rising prices?
This depends on the segment. For the premium category, the market is strong and offers many high-quality options, making it a good time for those with the budget. For the affordable segment, buyers may face challenges. However, with stable interest rates and a resilient economy, it remains a viable time to buy, provided you have a solid financial plan.
5. How has the real estate market in NCR (National Capital Region) been performing?
The NCR market has been experiencing modest or steady growth rather than a sharp surge. While it remains a significant market, its performance is more varied compared to Hyderabad or Mumbai. Gurugram is driving demand for premium properties, but the broader region is still balancing supply and demand dynamics.
