India’s luxury housing market is witnessing a stunning surge, with sales skyrocketing 37.8 per cent in 2024. But beneath the gloss lies a worrying reality: a mid-segment housing conundrum that is leaving millions without affordable homes.
In 2024, the luxury housing segment saw a spectacular 37.8 per cent leap over the previous year, which itself was a period of remarkable growth with properties priced Rs 1 crore and above accounting for a whopping 20 per cent of all sales
India’s luxury housing market is witnessing a stunning surge, with sales skyrocketing 37.8 per cent in 2024. But beneath the gloss lies a worrying reality: a mid-segment housing conundrum that is leaving millions without affordable homes.
India's luxury housing market is on a tear, fuelled by a potent mix of surging incomes, soaring aspirations and a buoyant economy. The numbers tell the story: in 2024, the segment saw a spectacular 37.8 per cent leap over the previous year, which itself was a period of remarkable growth with properties priced Rs 1 crore and above accounting for a whopping 20 per cent of all sales. This is no blip on the radar; instead it is an unmistakable trend, indicating that India's elite are willing to splurge on the finest homes money can buy.
Even more striking, sales of homes priced upwards of Rs 4 crore rocketed by 82 per cent year-on-year in the July-September quarter of 2024, signalling an unprecedented shift towards premium living.
Meanwhile, the mid-market plodded along at its stodgy post-pandemic pace, as prices spun out of the reach of most middle-income buyers amid unrelenting demand and, intriguingly, despite mounting inventory. Currently, over a million units in the so-called ‘affordable’ segment remain unsold across Indian cities, largely because at Rs 50-90 lakhs apiece, these units are anything but ‘affordable’.
As for the dramatic surge in the luxury segment, this was largely a metro-centric phenomenon with just Delhi-NCR, Mumbai and Bengaluru accounting for 90 per cent of luxury home transactions. The average ticket size in chart-topping Delhi-NCR grew 56 per cent through 2023, from Rs 93 lakhs to Rs 1.45 crore per unit. Hot on its heels, Mumbai retained its rank as India's most expensive housing market, with an average property price of Rs 1.47 crore, while Bengaluru witnessed a 44 per cent surge in average purchase prices, climbing from Rs 84 lakhs to Rs 1.21 crore.
The luxury housing market in India is being fired up by a confluence of factors, such as rising incomes, particularly across ICE and other new economy sectors, improved infrastructure and evolving buyer preferences. The growing aspirations of the affluent class, travelling the world like never before, are further fuelling the demand for premium housing.
Adding to the momentum is the country's expanding base of high-net-worth individuals (HNIs), projected to double to 1.65 million by 2027, up from a substantial 850,000 in 2023. Further, enhanced connectivity through metro expansions and expressways have made high-end homes in tony urban suburbs more accessible and appealing. Meantime, India's per capita net national income too has surged by 35 per cent between FY23 and FY25, putting more expendable cash in the pockets of affluent urbanites.
Finally, the luxury segment has benefited from a growing demand for homes that offer wellness features, sustainability and smart technology. The upper crust increasingly views these properties not just as residences but as long-term assets and symbols of lifestyle aspirations.
While the luxury segment took off across the top eight Indian metros, the mid-segment housing market remained largely grounded. Reason: an 11 per cent spike in property prices through the September quarter spooked the housing dreams of many middle-income buyers. This sluggishness is unlikely to change any time soon, unless there is a dramatic turnaround in the supply of 'affordable' mid-segment housing in its true sense. That is, units in the Rs 30 to Rs 60 lakh range, where urban demand far outstrips supply.
A recent CII-Knight Frank report sized up the challenge: By 2030 there could be a demand for 31.2 million mid-segment housing units in the country, 22.2 million of them from its cities. However, with rising land and construction costs, coupled with low profitability deterring private developers from investing in this segment, it is not clear how this mammoth demand would be met, particularly in the face of significant financing headwinds.
While the affordable housing loan market currently stands at Rs 13 trillion, with Housing Finance Companies (HFCs) managing Rs 6.9 trillion and Scheduled Commercial Banks (SCBs) handling Rs 6.2 trillion, the segment's reliance on loans reveals a worrying Achilles’ Heel. The potential financing opportunity for banks and HFCs, estimated at Rs 45 trillion, would still leave a large gap between demand and availability of viable financing options.
Despite robust demand projections, mid-segment housing continues to face major barriers, including high land acquisition costs, regulatory delays and limited institutional investment. While the expanded PMAY benefits and home loan subsidies have helped first-time buyers, these efforts fall short of addressing systemic issues.
According to industry experts streamlining regulatory processes and introducing targeted tax benefits for mid-segment housing developers are critical to bridging the demand-supply gap. Furthermore, innovative financing models and public-private partnerships could revitalise the segment.
"There is a need for streamlining regulatory processes and offering tax benefits for affordable housing developers to meet the gap between the demand and supply," said Santosh Agarwal, CFO and Executive Director of Alphacorp.
The conflicting narratives of luxury and mid-segment housing are expected to persist through 2025. Luxury housing will likely continue on its upward swing, buoyed by rising HNI numbers, infrastructure advancements and evolving buyer preferences, even as the mid-segment seeks strategic interventions to unlock its full potential. As top developers put their money where their mouths are with plans to launch 253 million square feet of housing over the next five years, there is no reason to suspect that this will not happen. The sector's resilience and growth prospects have received a thumping Rs-1281-crore vote of confidence—the cash raised by the via qualified institutional placements in 2024 alone.
"As the preferences of high-net-worth individuals (HNIs) evolve, there is a noticeable shift towards luxury homes that offer not just aesthetics but also wellness, sustainability, and smart technology," said Ashish Agarwal, Director, AU Real Estate.
As 2024 winds down, it is clear that the Indian housing market has been a study in contrasts. Even as the luxury segment blazed the real estate race tracks with a record-breaking run, the mid-segment stumbled on several hurdles. Yet, despite the challenges, the sector remains poised for sustained growth with several experts predicting a bright future in the years to come. Having said this, as the market evolves the need for balanced growth, one that caters to both high-end aspirations and mid- segment realities will become increasingly critical.
For now, India's real estate story remains one of ambition, resilience and untapped potential. As a new year beckons, who knows where the home run will take us? Hopefully to a luxury home at an affordable price! Could there be a better reconciliation of the conflicting narrative that so dominated 2024?