What will define Indian real estate in 2025?

As the new year approaches, the outlook of the Indian real estate could confuse any neutral analyst. But for the insider analysts who are actually stakeholders-cum-experts, it is like another new year with hopes and promises galore.

The stakeholders are so upbeat that all industry reports are projecting a bullish upcycle to continue for the next few years, thus taking Indian real estate to a valuation of $10 trillion by 2047. However, the ground reality for a common man looking for a house in his affordable budget, is in contrary to this.

How would the year 2025 shape out as a question that has many answers, and quite diverse ones. The outlook depends upon who is answering this critical question.

For average homebuyer looking for a roof over their head in job magnet cities, the mismatch between average wages and house price index is getting wider. But for the luxury buyers with deep pockets, this appears to be the best asset class to park money as of now.

A closer look at the ground reality clearly suggests that the statistics of higher sales and luxury demand conceals more than what it reveals.

Across the global property markets, a thorough study of boom and bust cycle clearly indicates that excessive supply and absorption of luxury housing is more often than not followed by a long patch of slowdown and degrowth.

After all, such a selective boom is not in sync with the vast majority of buyers in the market.

On the eve of 2025, there are certain critical questions that would define how the real estate market would pan out in the next year:

Can K-shape market sustain the growth trajectory for long?

The K-shape housing market where luxury is growing and affordable housing is shrinking is an accepted reality across the major cities of India. Can such an imbalanced market sustain in the long run?

It is true that on a macroeconomic level wealth is also moving up the value chain, but then there is no empirical evidence across the world to suggest that an asset class like property has maintained its growth trajectory in the luxury segment for long at the cost of affordable housing.

Affordability is a critical question for a majority of Indians. The supply in this segment is way beyond the average or median wages of majority of the Indians.

The average and median salaries across the major cities of India indicate the financial benchmark of affordability, that is five years of gross income and up to 40% of take-home salary as EMI, is heavily loaded against buying a house.

Will houses continue to be launched on perceived demand?

In a housing deficient country like India, unsold inventory tells a different tale. And the reason is houses being launched on perceived demand; either driven by developers’ gut feeling or peer pressure. But after the developers burn their fingers with unsold inventory, will the market show some maturity in the year ahead, and let the buyers define demand. Will the business get back to basics of demand assessment through scientific methodology of survey and research?

Demand and supply mismatch in the market is also critically linked to the affordability index of majority of home seekers across the cities of India.

Will large & listed developers seize the lion’s share of market?

As of now, roughly one-third of the real estate market is being served by the large and listed developers. These developers are not only at an all-time high sales number, but their stock performance is also skyrocketing. It clearly indicates that they have the bandwidth to grow further. Some of them are scouting for land parcels in Tier II cities as well.

Whether 2025 will be witness to large and listed developers’ penetration into new geographies is a question that would also define the future of Indian real estate.

Even more important is the question as to whether a handful of large and listed developers can serve the housing demand across the country.

Will alternative asset class attract the new age buyers?

A lot has been said about the emergence of alternative asset class and the regulatory framework has also evolved around products like fractional ownership and small and medium REITs.

Will it define the market ahead?

Will it evoke confidence of average investors?

Will alternative asset class just be a fantasy of urban young investors only?

Will these alternative asset class give the kind of returns as promised on paper?

Will alternative asset class offer better ROI than the traditional properties?

These are the kind of questions that would define the broader real estate market 2025 onwards.

Will reverse migration & affordability shift focus to Tier II & III cities?

The Top 10 cities of India are not only job magnet cities but also the hotbeds of property landscape. But these cities are no longer affordable for the average working class buyers. Add to it, the reality of Work-From-Home that has made Tier II & III cities a bit more attractive for investments.

Will 2025 be the defining moment for many of these small towns, where infrastructure development is also catching on? In all likelihood, these future cities also hold better appreciation potential than the saturated Tier I cities. In terms of affordability, too, these cities could attract more buyers compared to Tier I cities.

—The writer is CEO, Track2Realty