By Mr. Gaganpal Singh, President of the Association of Property Professionals (APP) and Co-Chairman of the NAR India Convention
India’s real estate market is experiencing a significant surge, driven by favorable economic conditions, evolving buyer preferences, and strategic government initiatives. In 2024, the sector witnessed remarkable growth, particularly in the luxury housing segment, with affluent buyers, including high-net-worth individuals (HNIs) and non-resident Indians (NRIs), propelling demand and sales. This momentum is expected to continue into 2025, as factors such as favorable interest rates, growing economic stability, and evolving buyer preferences propel the industry forward.
Industrial Tailwinds
A notable trend is the projected cumulative 50-basis-point cut in interest rates over the next few months. This cut is anticipated to enhance affordability and make homeownership more accessible, especially for middle-income groups and first-time buyers. This monetary easing is expected to stimulate demand across various housing segments, including mid- and high-end properties.
The luxury housing market continues to thrive, with premium housing comprising 16% of demand in 2024, up from just 6% in 2019. This growth is attributed to increasing wealth among high-net-worth individuals and a heightened demand for premium amenities. Developers are responding by offering integrated townships and tech-enabled homes equipped with advanced features such as AI-driven security, automated lighting, and sustainable energy solutions.
Influence of Global Trends
Geographically, there is a noticeable shift towards emerging micro-markets and tier-2 cities. Factors such as infrastructure development, urbanization, and a growing preference for suburban living are driving this trend. In India, cities like Pune are witnessing significant shifts in their real estate landscape, with developers adapting to changing buyer preferences and positioning themselves to leverage these growth drivers.
Government Support
Government policies are also crucial in shaping the real estate landscape. The Union Budget 2025 introduced measures such as increased capital expenditure on infrastructure and interest-free loans to states, aimed at accelerating urban transformation and boosting connectivity. These initiatives are expected to indirectly fuel real estate demand by enhancing infrastructure and generating employment opportunities.
Key reforms include removing restrictions on owning two self-occupied properties without tax implications and increasing the tax exemption limit to ₹12 lakh (effectively ₹12.75 lakh) to enhance affordability for middle-class homebuyers. The TDS threshold on rental income has also been raised from ₹2.40 lakh to ₹6 lakh, reducing compliance burdens for landlords. Additionally, individuals with three or more properties will have only two classified as self-occupied, with the rest subject to taxable notional rent. These measures are expected to drive investment in holiday and second homes.
Road Ahead
Despite smooth progress in the sector, challenges persist, particularly concerning affordability. While the luxury segment is experiencing robust growth, there is a need to address the housing requirements of middle and lower-income groups. Experts suggest that affordability for first-time homebuyers may worsen unless there is a significant reduction in interest rates from the Reserve Bank of India. However, the country’s property market is on an upward trajectory, characterized by a growing trend of property purchases across various segments. The interplay of economic stability, favorable interest rates, evolving buyer preferences, and supportive government policies is shaping a dynamic and resilient real estate landscape poised for continued growth in the coming years.
