Housing prices see 13 pc growth in last two years as inflation eases in India

MUMBAI: Residential real estate prices have risen continuously since 2013 and in the last two years, they appreciated at a compound annual growth rate (CAGR) of 13 per cent while the consumer price inflation (CPI) inflation moderated by 1.3 per cent on an annual average basis to 5.4 per cent at the end of FY24, a report showed on Thursday.

Around 8.25 lakh new homes were launched and 8.72 lakh units were sold during the last two financial years.

This trend signifies a clear outperformance of real estate prices compared to inflation.

For investors seeking to preserve and grow their wealth amid inflationary pressures, real estate has emerged as a popular hedge, according to Anarock research.

After the 2019 elections, average residential prices across the top seven cities have appreciated at a CAGR of 6 per cent -- rising from Rs 5,600 per sq feet in June 2019 to Rs 7,550 per sq feet by the end of FY2024.

“A similar trend was witnessed in relation to the 2014 elections. Average prices across the top seven cities saw an annual rise of over 6 per cent in 2014 when compared to the preceding year -- from Rs 4,895 per sq feet in 2013 to Rs 5,168 per sq feet in 2014,” explained Shobhit Agarwal, MD and CEO, Anarock Capital.

Conversely, before the 2019 elections, average prices rose by a mere one per cent annually and remained range-bound during the tenure.

In the last decade, there were periods when the supply of real estate exceeded demand, resulting in stable price growth that kept pace with inflation in the pre-pandemic era.

Between 2013 and 2020, the top seven cities recorded a cumulative supply of 23.55 lakh units against a demand of 20.68 lakh units, the report showed.

“Gradually, demand rose in tandem with new supply. Available inventory peaked at approx. eight lakh units by the end of 2016. However, following the pandemic, residential real estate saw a rapid recovery, leading to significant price growth that has outpaced general inflation,” the findings showed.

“Real estate investments offer diversification benefits within a portfolio,” said Agarwal.

The consumer price inflation further eased to a 12-month low of 4.75 per cent in May as declining fuel and cooking oil prices helped to bring down the burden on household budgets.