The outlook of the Indian real estate on the eve of 2025 could confuse any neutral analyst. But for the insider analysts who are actually stakeholder-cum-expert, it is like another new year with hopes and promises galore. The stakeholders are so upbeat that all the industry reports are projecting a bullish upcycle to continue for the next few years, thus taking Indian real estate to a valuation of $10 trillion by 2047. Track2Realty finds that the ground reality for a commo0n man looking for a house in his affordable budget stands in contrast.
How would the year 2025 shape out stands as a question that has many answers, and quite diverse ones. The outlook depends upon who is the one that has to answer this critical question. For the average home buyers looking for a roof over the head in job magnet cities, the mismatch between average wages and house price index is getting wider. But for the luxury buyers with deep pockets, this appears to be the best asset class to park money as of now.
A closer look at the ground reality clearly suggests that the statistics of higher sales and luxury demand conceals more than what it reveals. Across the global property markets, a thorough study of boom & bust cycle clearly indicates that excessive supply & absorption of luxury housing is more often than not followed by a long patch of slowdown & degrowth. After all, such a selective boom is not in sync with the vast majority of the buyers in the market.
On the eve of 2025, there are certain critical questions that would define how the real estate market would pan out:
Q #1: Can K-shape market sustain the growth trajectory for long?
The K-shape housing market where luxury is growing and affordable housing is shrinking is an accepted reality across the major cities of India. Can such an imbalanced market sustain in the long run? It is true that on a macroeconomic level wealth is also moving up the value chain, but then there is no empirical evidence across the world to suggest that an asset class like property has maintained its growth trajectory in the luxury segment for long at the cost of affordable housing.
Affordability is a critical question for the vast majority of Indians. The supply in this segment is way beyond the average or median wages of vast majority of the Indians. The average & median salaries across the major cities of India indicates the financial benchmark of affordability, that is 5 years of gross income & up to 40% of take-home salary as EMI, is heavily loaded against buying a house.
Q #2: Will houses continue to be launched on perceived demand?
In a housing deficient country like India, unsold inventory tells a different tale. And the reason is houses being launched on perceived demand; either driven by developers’ gut feeling or peer pressure. But after the developers burning their hands with unsold inventory, will the market show some maturity in the year ahead, and let the buyers define demand. Will the business get back to basics of demand assessment through scientific methodology of survey & research? Demand & supply mismatch in the market is also critically linked to the affordability index of majority of home seekers across the cities of India.
Q #3: Will real estate continue to give double digit returns?
Investments in luxury real estate has in recent times given double digit returns, and that is what is fueling the luxury housing demand. This is the reason that rich & affluent class continue to park money into this asset class. A perception has hence gained ground that real estate offers the best ROI. Will this trend continue in 2025 or prices have reached to its peak point? With more luxury supply than what the market can absorb, the year ahead could well be the plateau point of luxury housing in India. The investors might get exposed to the law of diminishing returns thereafter.
Q #4: Will reverse migration & affordability shift focus to Tier II & III cities?
The Top 10 cities of India are not only job magnet cities but also the hotbeds of property landscape. But these cities are no longer affordable for average working class. Add to it, the reality of Work-From-Home has made Tier II & III cities a bit more attractive for investments. Will 2025 be the defining moment for many of these small towns, where infrastructure development is also catching on? In all likelihood, these future cities also hold better appreciation potential than the saturated Tier I cities. In terms of affordability too, these cities could attract more buyers compared to Tier I cities.
Q #5: Will large & listed developers seize the lion’s share of market?
As of now, roughly one-third of the real estate market is being served by the large & listed developers. These developers are not only at an all-time high sales number, but their stock performance is also skyrocketing. It clearly indicates that they have the bandwidth to grow further. Some of them are scouting for land parcels in Tier II cities as well. Whether 2025 will be witness to large & listed developers’ penetration into new geographies is a question that would also define the future of Indian real estate. Even more important is the question as to whether a handful of large & listed developers can serve the housing demand across the country.
Q # 6: Will alternative asset class attract the new age buyers?
A lot has been said about the emergence of alternative asset class and the regulatory framework has also evolved around products like fractional ownership and small & medium REITs. Will it define the market ahead? Will it evoke confidence of average investors? Will alternative asset class just be a fantasy of urban young investors only? Will these alternative asset class give the kind of returns as promised on paper? Will alternative asset class offer better ROI than the traditional properties? These are the kind of questions that would define the broader real estate market 2025 onwards.
Ravi Sinha
#RaviTrack2Media
Ravi Sinha is a journalist with over two decades of cross-discipline media exposure. He is the CEO of real estate thinktank group Track2Realty. He has been writing extensively on the real estate sector for more than a decade now. Evaluation of real estate brand performance is his core domain expertise and he has immense insight into consumers’ psychograph. He has conceptualised Track2Realty BrandXReport as India’s 1st & only objective & non-paid brand rating journal that is industry-accepted benchmark of brand equity & ranking of the Indian real estate companies.
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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