Affordable Housing Crisis Fuels Price Surge in India

India's house prices are likely to grow more rapidly than anticipated, spurred on by robust demand from high-end purchasers and chronic shortages of affordable housing, a Reuters survey of 20 real estate analysts between August 14 and September 12 found.

Median projections predict average house prices to rise 6.3 percent in 2025 and 7.0 percent in 2026, from around 4.0 percent in 2024. This steep hike is likely to propel more lower- and middle-class Indians into renting, where rents are also increasing 5 percent to 8 percent ahead of consumer inflation.

"As the affordability both in the core and the suburbs is decreasing, more individuals are renting and as more individuals rent, rentals increase," explained Ajay Sharma, MD of Valuation Services at Colliers. 

Key Highlights:

• India’s average home prices are forecast to rise 6.3 percent in 2025 and 7.0 percent in 2026, driven by luxury demand and a growing shortage of affordable housing
• Rental costs are expected to increase by 5–8 percent, as more middle- and lower-income families are priced out of buying homes in urban areas
• India faces a 10 million-unit affordable housing shortfall, projected to triple by 2030, worsening housing inequality despite strong economic growth

Even after the Reserve Bank of India reduced interest rates by 100 basis points to 5.50 percent, experts argue that this has done little to enhance the affordability of home purchases. Increasing property prices, especially in NCR and Bengaluru, are negating any positive impact from cheaper borrowing costs.

"Thanks to the market being skewed towards higher-end and luxury housing, first-time buyers will likely get priced out, despite policies that sound good on paper," opined Avneesh Sood, Director, Eros Group.

Analysts are equally divided about the affordability situation for first-time buyers next year: 10 expect it to get better, while 9 expect it to get worse.

Also Read: Top 10 Indian Real Estate Leaders Redefining Affordable Housing

"Post-financialisation in real estate, we’ve worsened affordability. Housing doesn’t give you choices, it gives you frustrated options," noted Pankaj Kapoor of Liases Foras.

India now faces a 10 million-unit deficit in affordable housing, a number projected to triple by 2030, according to Knight Frank.