The Indian real estate market has continued to show robust growth in 2024, driven by demand for premium homes. However, analysts are now flagging inventory pile-ups and a potential "bubble" formation in this segment.
According to data from real estate consultant Knight Frank, 2024 saw annual sales grow by 7%, with sales volume surging to a 12-year high. However, during the same period, the market saw inventory of unsold homes rise by 5% year-on-year to over 4.95 lakh units.
The consultancy says, "While sales have seen healthy growth overall, the unsold inventory has consistently increased since 2020 as supply levels have exceeded sales."
Data shows that unsold inventory in higher ticket sizes, that is, homes priced between Rs 2-5 crore and Rs 5-10 crore, have grown by 54% and 52% year-on-year, respectively. The agency warns that the segment "warrants a closer look" to assess if it is approaching "bubble territory or a potential correction."
According to Angad Bedi, the Chairman and MD of real estate services provider BCD Group, this is just the "cyclic nature of Indian industry".
"The industry’s robust performance over the last five years has provided developers the room for being bullish on the industry, enabling them to confidently launch various projects across price points," said Bedi.
Supply-Demand Imbalance
Since the pandemic, the Indian residential market has had a tremendous run with an annual sales volume growth of 23% since 2020, as per Knight Frank. It was driven by increased savings during lockdowns, minimal income disruptions in mid and high-income brackets, household wealth creation, and robust economic growth.
During this period, homebuyers increasingly shifted towards premium housing, with demand for units over Rs 2 crore seeing rapid growth. In 2024 as well, as per Knight Frank, residential units priced between Rs 2-5 crore saw 62% annual sales growth.
However, the consultancy notes, "The higher ticket sizes have largely displayed the opposite trend, with sales growing, but it has been consistently dwarfed by supply over the past two years."
There, data shows that in two particular Indian metro cities, the overall launch of housing units far outpaced sales. In Bengaluru, housing unit launches by developers grew by 10% year-over-year in 2024, while sales in the same period saw only a 2% growth. In Pune, this gap was even steeper, with new property launches growing at 40% compared to just a 6% rise in sales growth. Although in Delhi NCR, Mumbai, Chennai, Kolkata, and Ahmedabad, this trend was opposite, with fewer launches in 2024 and healthy sales growth.
"We continue to witness a rise in the demand for new projects which caters to all segments of the industry and the rising land and property prices is further encouraging fence sitters to invest in the market which is expected to normalise inventory levels over the coming quarters," said BCD Group Chairman Angad Bedi.
Housing Sales Drop in the December Quarter
Between October and December of 2024, Indian cities saw a steep drop in home sales, according to data from digital real estate transaction and advisory platform Proptiger.com. Data from eight cities analysed by the agency saw home sales drop by 26% in the December quarter of 2024 compared to the same period of the previous year.
Bangalore, Hyderabad, Kolkata, Mumbai, and Pune all saw a double-digit drop in sales, with many crossing the 30% mark. Only Delhi-NCR among the eight cities saw its home sales grow by 50% between October and December 2024.
The agency attributed this drop to state elections during the period, as well as flagged property price increases across the country, which has "led to a wait-and-watch approach by both developers and buyers."
"Looking ahead, with no immediate signs of interest rate cuts and with economic growth slowing down, the market is expected to remain cautious in the coming quarters," said Dhruv Agarwala, Group CEO, Housing.com and Proptiger.com.
