Trends in Housing Price Index (NHB- RESIDEX)

The Housing Price Index (HPI) is a crucial indicator used to track the movement of residential property prices across different cities and regions over time. It reflects the performance of the real estate sector and provides insights into the demand and supply dynamics, investment potential, and housing affordability in the country. In India, HPI is primarily compiled by the Reserve Bank of India (RBI) and the National Housing Bank (NHB) through its RESIDEX index. These indices serve as benchmarks for policymakers, investors, developers, and financial institutions.

Understanding the Housing Price Index

The Housing Price Index measures price changes in residential properties, taking into account both new constructions and resale transactions. It is a vital tool for assessing real estate market trends and for evaluating the impact of monetary policy, credit flow, and economic growth on housing demand.

• The RBI-HPI is based on the valuation prices of residential properties collected from housing finance institutions and scheduled commercial banks.
• The NHB-RESIDEX covers actual transaction prices of residential properties in various cities, reflecting both primary and secondary market trends.

Recent Trends in Housing Prices

1. Moderate and Steady GrowthThe overall trend in housing prices across India has shown moderate but consistent growth since 2022. After a period of stagnation during the pandemic, the market witnessed a revival driven by improved economic activity, rising incomes, and strong end-user demand.
   • The Housing Price Index recorded an annual increase of around 4–6% in 2024–25, indicating a stable market recovery.
   • The NHB-RESIDEX showed a steady rise in the average index level, reflecting incremental price gains across metropolitan as well as Tier-II cities.
2. Post-Pandemic RecoveryThe housing market experienced a slowdown during 2020–2021 due to the COVID-19 pandemic, as mobility restrictions and economic uncertainty affected transactions. However, from 2022 onwards, housing demand revived, supported by lower interest rates, flexible work-from-home options, and renewed focus on home ownership.
3. Regional Variations
   • Metropolitan cities such as Mumbai, Delhi NCR, Bengaluru, Hyderabad, and Kolkata witnessed moderate but stable growth in residential prices, averaging between 5–8% annually.
   • Some cities such as Pune and Ahmedabad recorded sharper appreciation due to infrastructure developments and demand from the IT and manufacturing sectors.
   • In contrast, smaller Tier-II and Tier-III cities experienced more modest growth, reflecting supply expansion and affordability concerns.
4. Segment-Wise Trends
   • Luxury and premium housing segments showed stronger appreciation, driven by affluent buyers and Non-Resident Indian (NRI) investments.
   • Affordable and mid-income housing segments, though supported by government schemes like Pradhan Mantri Awas Yojana (PMAY), recorded slower growth due to input cost pressures and limited new launches in some regions.

Factors Influencing Housing Price Trends

1. Demand-Supply Dynamics
   • Rising urbanisation, population growth, and increased household formation have fuelled sustained housing demand.
   • However, limited availability of urban land and high construction costs have kept prices firm.
2. Interest Rate Movements
   • The Reserve Bank of India’s monetary policy has a direct bearing on home loan rates and, consequently, on housing demand.
   • During 2020–2022, low interest rates spurred demand, while moderate rate hikes in 2023–24 slightly slowed momentum.
3. Economic Growth and Employment
   • Housing price growth correlates closely with economic expansion, income levels, and employment conditions, particularly in service-driven cities like Bengaluru, Pune, and Hyderabad.
4. Cost of Construction and Raw Materials
   • Rising costs of cement, steel, and labour have pushed up housing prices across most regions. Developers have passed a portion of these costs to consumers, contributing to steady price increases.
5. Government Policies and Infrastructure
   • Initiatives such as Smart Cities Mission, PMAY-Urban, and major infrastructure projects (metros, expressways, and airports) have improved connectivity and spurred housing demand in peripheral urban areas.
6. Investor and NRI Participation
   • Increasing interest from domestic investors and NRIs has supported the upper segment of the housing market, contributing to price appreciation in major cities.

Regional Overview

• Mumbai Metropolitan Region (MMR): Continued to witness stable price growth, supported by infrastructure projects like the coastal road and metro expansion.
• Delhi-NCR: Prices remained steady due to improved supply and revival of end-user demand.
• Bengaluru: Recorded strong demand from the IT workforce, keeping both sales and prices firm.
• Hyderabad: Noted one of the sharpest price appreciations owing to infrastructure expansion and investment inflows.
• Kolkata: Showed renewed growth momentum after years of stagnation.

Future Outlook

The housing market is expected to remain on a positive trajectory in the short to medium term, with steady price appreciation projected across most regions.

1. Forecasted Growth:
   • Housing prices are likely to increase by around 6–7% annually in 2025–26, with continued demand for mid- and premium-segment housing.
   • Urbanisation and infrastructure development are expected to be key drivers of growth.
2. Emerging Trends:
   • Increasing demand for larger homes and eco-friendly developments.
   • Rising focus on Tier-II cities such as Lucknow, Coimbatore, Indore, and Jaipur due to affordability and better connectivity.
   • Integration of digital and technology-based platforms in housing transactions and mortgage lending.
3. Risks and Challenges:
   • Potential affordability constraints due to persistent price rises.
   • Interest rate fluctuations affecting home loan costs.
   • Supply-side constraints caused by delays in project approvals and high input costs.

Significance of Housing Price Index

• Economic Indicator: Acts as a barometer for real estate health and overall economic growth.
• Policy Tool: Helps the government and RBI assess inflationary pressures and plan monetary interventions.
• Investor Confidence: Guides investors and developers in evaluating real estate market conditions.
• Affordability Assessment: Reflects changes in household purchasing power relative to housing costs.