By Aditya Kushwaha, CEO and Director, Axis Ecorp
The Indian real estate market is undergoing significant changes. Even though rising property prices remain a challenge, the sector continues to evolve. In 2024, the market experienced growth due to demand for spacious homes, luxury living, and integrated developments. The real estate sector is poised for another remarkable year in 2025, with a growing emphasis on health-centric designs and a continued commitment to sustainability, which remains a key priority for the industry. Tier I cities will continue to witness a slowdown, and there will be an increased focus on Tier II and III cities. These cities are emerging as key players in shaping the market’s future.
Housing prices are expected to rise modestly, single-digitally, in 2025, following a substantial 21% appreciation in 2024. The muted growth can also be attributed to an increased supply to meet growing demand. A potential reduction in the Reserve Bank of India’s (RBI) repo rate could lower home loan interest rates, providing relief to many prospective homebuyers and enabling further growth.
The Big Question on Affordability
While the outlook for 2025 appears positive with modest price growth and potential rate cuts, the big question remains whether these trends will translate into improved affordability for homebuyers. Some indications suggest that affordability may improve. However, significant barriers could prevent widespread affordability from being realised.
Real estate prices may stabilise in 2025, particularly in markets that have become overheated in recent years. The post-pandemic period saw a surge in demand for housing, leading to rapid price appreciation. As noted by Liases Foras Research, the market is beginning to transition. Sales and project launches have slowed down, which could pave the way for more realistic pricing. This correction may benefit homebuyers, especially those in the mid-income segment, as the focus shifts from premium properties to more affordable housing options.
Another critical factor that could significantly enhance affordability in 2025 is the potential for supportive government policies and favourable monetary measures. A reduction in the Reserve Bank of India’s repo rate would lower the cost of borrowing, making home loans more accessible and affordable. This could encourage a larger segment of the population to consider homeownership, particularly in Tier II and Tier III cities where property prices are more manageable compared to metro areas.
Furthermore, targeted government initiatives could play a pivotal role in narrowing the affordability gap. Subsidies for affordable housing projects and tax incentives for first-time homebuyers are among the measures that could stimulate demand while easing financial burdens. Programs like the Pradhan Mantri Awas Yojana, which have already shown measurable success in making housing more accessible, could see an expansion or increased funding in 2025 to reach a broader audience.
With the upcoming 2025 budget, there is a growing sense of anticipation and optimism. Stakeholders across the real estate sector are hopeful that new policies or enhancements to existing schemes will further prioritise affordable housing. Such measures could address both immediate housing needs and long-term affordability challenges, providing a much-needed boost to the housing market while aligning with the government’s vision of “Housing for All.”
Despite these positive signs, significant challenges remain. Rising input costs, including construction materials, labour, and land, continue to put upward pressure on property prices. These costs limit the ability of developers to offer homes at lower prices without affecting their profit margins. While most Tier 1 cities continue to face muted growth, some of them, including Mumbai, Delhi, and Bengaluru, remain robust. High demand, coupled with limited land availability, sustains elevated price levels in these metropolitan areas. Even if corrections occur, the affordability gap in such cities is unlikely to close significantly.
So, affordability in real estate will continue to be a mixed bag in 2025. The maximum growth spurt for affordable housing will continue to come from Tier 2 and 3 cities, while Tier 1 cities will shift their stance towards affordable luxury.
Pivoting from affordability to affordable luxury
The housing sector is expected to grow steadily in 2025. The luxury segment will see strong demand. The trend of premiumisation, which reflects a preference for high-end housing, is set to continue. A 50-basis-point cut in interest rates could make homeownership more affordable for many. Despite past challenges like rising prices and stagnant interest rates, the outlook remains optimistic.
Developers are likely to emphasise affordable luxury in 2025. These homes will combine premium features with competitive pricing. This trend will appeal to millennials and the expanding middle class. Established cities like Mumbai, Delhi, and Kolkata will lead this segment. Emerging cities such as Goa, Hyderabad, Ahmedabad, and Coimbatore will also play a significant role. Features like smart home automation, modular kitchens, and wellness-focused amenities will be key attractions.
 The Path Ahead
The Indian real estate market in 2025 promises growth and innovation. Developers will focus on health-conscious designs, affordable luxury, and senior living. Emerging cities and transit-oriented projects will drive new opportunities. Technology and sustainability will shape future developments. Affordability, however, will remain a key concern. Addressing this issue will require coordinated efforts from policymakers, developers, and financial institutions. Buyers and investors can expect a dynamic and evolving market that offers both challenges and opportunities.
