Rising Property Prices in India: Is Stability Certain?

India’s real estate sector, traditionally a stronghold for investment, is now under the spotlight with questions raised about its long-term sustainability. A recent podcast featuring the co-founder of Zerodha sparked lively debate as experts analysed the potential risks and growth factors in India’s housing market. While real estate remains the preferred investment for 59% of Indians, as per a recent FICCI-ANAROCK survey, the enduring question of a potential downturn looms. Zerodha’s co-founder questioned if surging property prices could eventually stabilise or even decline, especially in light of shifting work patterns and evolving population dynamics.

Key industry figures, including the Chairman of Prestige Group and the Executive Director of Brigade Group, remain confident about real estate’s upward trajectory, citing robust urbanisation and population growth. The Brigade executive noted that India’s urban population is expected to increase to 40% by 2030, translating to nearly 120 million new city dwellers. With growing aspirations and a middle-class population, they believe demand will only rise, creating a lasting, solid market. The Prestige Chairman agreed, adding that India’s demand is sustained by factors unique to the region, including a strong workforce and rapid development, especially in metropolitan areas where job creation is constant.

Others, however, caution that India’s real estate market may face challenges similar to those experienced by Japan, where a declining birth rate has slowed housing demand. India’s fertility rate has significantly decreased over the past few decades, which could affect housing demand in the long run. Additionally, the rise of remote work has created a shift in housing needs, with some urban professionals considering suburban or rural living for affordability and space. This shift may temper the demand for housing in urban centres, creating a need for flexible housing policies that adapt to changing preferences.

The podcast also touched on the ongoing rent-vs-buy debate, with Zerodha’s co-founder reflecting on his recent decision to purchase his first home, citing the stability it offered despite the benefits of renting. Industry experts argue that the decision often hinges on individual lifestyle and financial circumstances. The Managing Director of Macrotech Developers emphasised the value of early property investment for wealth creation and long-term security, contrasting the short-term cost advantages of renting with the stability that home ownership provides. Financial advisors recommend that buyers aiming for property investment should have 30-40% of the home’s value for down payment, ensuring a robust financial foundation in volatile times.

India’s real estate market appears resilient, yet the landscape is evolving with demographic changes, work-from-home trends, and economic factors. The challenge will be to maintain sustainable growth without compromising affordability for future generations. With the right balance between urban expansion and adaptability, experts anticipate that India’s property market will continue to be a valuable, albeit increasingly competitive, investment opportunity.