India’s Home Prices to Outpace Inflation in 2025, Rents Set for Even Sharper Rise

Surging Demand and Limited Supply Drive Housing Costs Beyond Reach for Many

India’s residential real estate market is set for another year of strong price increases, with home values expected to rise faster than inflation while urban rental costs soar even higher, according to a recent survey of property experts. The trend threatens to make homeownership more elusive for first-time buyers, as stagnant wage growth and high borrowing costs widen the gap between affordability and reality.

A Reuters poll conducted between February 17 and March 4, which surveyed 14 housing market experts, forecasts average home prices in India to surge 6.5% in 2025 and 6.0% in 2026, following an approximate 4.0% increase last year. Meanwhile, urban rents are expected to climb between 7.0% and 10.0% this year, significantly outpacing the country’s expected consumer inflation of 4.3% and 4.4% over the next two fiscal years.

Housing Market Dynamics: High Demand, Low Supply & Rising Prices

While India’s housing market continues to expand, the benefits are largely concentrated among high-income earners, leaving middle- and lower-income households struggling to afford homes.

• Economic Slowdown and Stagnant Wages: Sluggish growth in well-paying jobs, particularly in urban centers, has depleted savings for working-class families, pushing them toward long-term renting rather than homeownership.
• High Demand vs. Limited Supply: A surge in housing demand, coupled with limited supply in major metropolitan regions, has driven home prices higher, making affordability a growing concern.
• Impact of Interest Rates: The Reserve Bank of India (RBI) has signaled a cautious approach to rate cuts, meaning borrowing costs are likely to remain high, further challenging affordability for prospective buyers.

“This is a double blow for millions of aspiring homeowners,” said Pankaj Kapoor, Managing Director at Liases Foras, a real estate research firm.
“Not only are home prices rising faster than inflation, but rental costs have been soaring for years. For many, homeownership is becoming an unattainable dream.”

City-Wise Home Price Trends: Where Costs Are Rising the Fastest

India’s top metro cities are expected to witness significant price increases, further straining affordability:

• Mumbai & Delhi (including NCR) → Home prices forecasted to rise between 5.8% and 8.5% in 2025 and 2026
• Bengaluru & Chennai → Expected price increase between 5.0% and 7.3%
• Hyderabad, Pune & Kolkata → Anticipated growth of 4.5% to 6.0%

These projections reflect strong demand in urban centers, where population growth and increasing migration continue to put pressure on housing supply.

Ajay Sharma (Colliers International) and Atif Khan (CBRE) agree that the housing market remains in favor of sellers, making it increasingly difficult for first-time buyers to enter the market.

Rising Rents: A Bigger Concern Than Home Prices?

While home prices are increasing, rental costs are climbing at an even faster rate, making urban living more expensive than ever. According to the survey, rents in key cities are expected to rise between 7.0% and 10.0% this year, far outpacing both inflation and income growth.

For first-time buyers, this means an even tougher challenge—saving for a down payment while dealing with rising rent costs.

“Affordability is taking a hit,” said Arvind Nandan, Managing Director of Research at Savills India.
“With price escalations outpacing income growth, more people will have no choice but to continue renting. For many, buying a home in high-demand metros is no longer a realistic goal.”

Government Intervention Needed to Solve Affordability Crisis

A key question remains: What can be done to make homeownership more affordable? According to the survey, 11 out of 13 property market experts believe that government intervention is the most likely solution.

The Indian government has already launched multiple schemes to support affordable housing, including:

• Pradhan Mantri Awas Yojana (PMAY) → Aiming to provide affordable homes to urban and rural residents
• Credit-Linked Subsidy Scheme (CLSS) → Providing interest rate subsidies for first-time homebuyers
• Faster Development of Smart Cities → Encouraging urban planning initiatives to increase housing supply

Despite these measures, the supply of affordable housing remains a massive challenge, with an estimated shortage of 10.1 million units, according to Vivek Rathi, Director of Research at Knight Frank India.

“While policy measures have helped, the reality is that India’s housing market still favors high-income earners. Without targeted intervention and incentives for affordable housing projects, the gap between supply and demand will continue to widen,” Rathi added.

What Lies Ahead? The Future of India’s Housing Market

While home prices will likely continue to rise, the next few years could see a shift in housing policies, new financial incentives, and evolving consumer behavior. Key trends to watch include:

1. Potential Government Reforms → Introduction of more aggressive policies to increase affordable housing supply.
2. Shifts in Buyer Behavior → Increased preference for suburban homes and co-living spaces as metro prices remain high.
3. Impact of RBI Rate Cuts → If the Reserve Bank of India lowers interest rates, it could ease home loan burdens, helping first-time buyers.
4. Growing Rental Market → With homeownership becoming increasingly difficult, demand for long-term rentals and rental yield investments will rise.

Conclusion: Housing Market Favors the Wealthy, While First-Time Buyers Struggle

India’s real estate market remains highly competitive, with prices and rents rising faster than inflation. While this benefits investors and high-income buyers, it makes homeownership increasingly unattainable for millions of working-class families.

Government intervention will be critical in ensuring that the housing market remains accessible, especially in major cities where the supply-demand gap is widening. Until then, urban home prices and rents are expected to keep climbing, pushing more individuals and families into long-term renting.

For first-time buyers, the dream of homeownership is becoming harder to achieve, as soaring costs outpace income growth. Whether affordability improves in the coming years depends on policy changes, economic recovery, and how developers respond to shifting market conditions.