Rising Prices, Rentals, And Affordable Home Shortages: How Are Homebuyers Struggling In India?

New Delhi: Home prices in India are rising faster than expected, driven by strong demand from affluent buyers, while a shortage of affordable housing is keeping many urban residents confined to expensive rental options, according to a recent Reuters survey of property experts.

The concentration of well-paying jobs in a few major cities, combined with stagnating wages, has put home ownership out of reach for millions moving to urban areas for work. This trend is forcing most first-time buyers to rent rather than purchase homes.

"The current problem is strong macro numbers have not benefited the population at the lower side of the pyramid, and they are at a disadvantage," Ajay Sharma, managing director of Valuation Services at Colliers, told Reuters, highlighting the challenge for buyers with stagnant disposable incomes.

Economic Growth Benefits Only a Few

Despite India’s economy growing 7.8% in the last quarter, faster than most major peers, these gains have largely benefited a small segment of the population, leaving many job seekers on the sidelines.

This inequality is reflected in the housing market, where demand for premium properties thrives while affordable housing lags far behind. India faces a current deficit of about 10 million affordable homes, a gap Knight Frank projects could triple by 2030.

Forecasted Home Price Increases

Average home prices, which have more than doubled over the past decade, are forecast to rise 6.3% this year and 7% in 2026, according to median estimates from a Reuters survey of 20 property analysts.

This is higher than predictions in June, when analysts expected growth of 6% and 5% respectively.

"With the market leaning heavily toward premium and luxury homes, entry-level buyers are likely to be priced out, even with policies that look good on paper," said Avneesh Sood, director at Delhi-based Eros Group.

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Rising Rentals as Affordability Declines

As affordability declines in both city cores and suburban areas, more people are turning to rentals. Median forecasts predict urban rents will rise 5% to 8% over the coming year, outpacing consumer inflation.

This trend is supported by ANAROCK Research & Advisory, which found that rising housing prices are a concern for 81% of buyers, with 47% very concerned.

The survey noted that only 21% of buyers will buy as planned, while 71% face delays in purchasing decisions due to affordability issues (41%) and limited options within budget (35%).

Affordable Housing Falls Short

Affordable housing options are also failing to meet buyer expectations. According to the H1 2025 ANAROCK survey, 62% of respondents were dissatisfied with current affordable housing projects, citing poor project location (92%), low construction quality and design (90%), and small unit sizes (77%).

Shift Toward Premium and Larger Homes

Meanwhile, preferences in the housing market are shifting toward premium and luxury segments. The H1 2025 survey revealed that 36% of prospective homebuyers now prefer properties priced between Rs 90 lakh and Rs 1.5 crore, up from 18% in the pre-COVID period.

Interest in affordable homes under Rs 45 lakh has declined sharply from over 40% in H2 2020 to just 17% in H1 2025. Larger homes remain popular, with 45% of buyers preferring 3BHK units and a growing interest in 4BHK and above.

Declining Demand for Ready Homes

Another notable trend is the declining demand for ready-to-move-in homes. The ratio of ready homes to new launches fell to 16:29 in H1 2025, down from 20:25 in H1 2024, as buyers increasingly gravitate toward new launches from reputed developers who ensure timely delivery.

Real Estate as an Investment Avenue

Real estate continues to be an important avenue for investors as well. The survey noted that 44% of respondents who diversified their investments are gravitating toward property, drawn by long-term stability and capital appreciation.

Other motivations include leveraging capital gains for entrepreneurial ventures (24%) and building emergency or retirement funds (16% and 12%, respectively).