Residential realty saw a 28% dip in Q1 2025. Euphoria fades as unaffordability, job woes hit buyers. Yet, infra push, rate cuts, and Tier-2 growth offer hope for a stable, adjusted market ahead.
For the last two quarters residential real estate has been on a downhill. After a bull run of three years, residential sales declined in 2024 and in the first quarter of 2025, sales have registered a substantial decline of 28 percent . Amidst this slide, the big question is whether the bull run is over and residential real estate is facing slowdown.
Though real estate developers are not ready to admit the prevailing stress in residential realty, one thing is sure that the frenzy and euphoria associated with real estate has subsided. Developers and some real estate experts may shrug off the depression in residential sales as a temporary blip, the underlying concern and uneasiness is reflected in real estate developers' desperate attempt to push sales to offload their unsold inventory. Though they have been putting up a brave face, yet they are forced to offer sops and subvention schemes to beat slowdown and revive sales. At least that is the situation in overheated markets like Delhi-NCR.
This time during Navratri, developers in Delhi-NCR have unlocked sops and freebies beyond nine days to one month, to bring back homebuyers. They were offering attractive deals even for luxury property. In their one month long 'Great India Property Bazar 4.0, Noida-based Mahagun Developers were offering stamp duty waiver besides free club membership and free car parking, free maintenance for one-year, modular kitchen and zero charges on first transfer.
Mahagun Group for its Medalleo ultra luxury 3/4 BHK condominiums priced 3.35 crore onwards, offered benefits up to 1.41 crore. For Monorialle 3-4-5 BHK condominiums and penthouses priced INR 4.30 crore onwards, the group was offering benefits up to INR 1.06 crore. For Mahagun MY Lagoon waterfront 3/4 BHK luxury residences, priced INR 1.99 crore onwards, benefits up to INR 39.22 lakh were on offer. Krasa Group was offering a bonanza in the form of free international trip, free car, free iPhone, Amazon MacBook Pro, cash back up to INR 5 lakhs, Amazon MacBook pro gift voucher, besides free one year maintenance and waiver on first transfer charges. So much so that developers are now turning to NRIs as housing sales in India are getting a lukewarm response.
Despite all the hype about realty boom, what has put brakes on the market frenzy and euphoria is rising unaffordability in some markets including Delhi-NCR where prices had peaked. According to Anarock data, in NCR market, capital values had grown by up to 128% between 2021 end and 2024 end. Average home prices have seen 23% YoY rise in Q1 2025. Though there is much talk about rising disposable incomes, yet contrary to this, corporate salaries have not been keeping pace with the rise in inflation. Further, job insecurity has made matters worse. Due to this many home seekers have been deferring their decision to buy home in view of high EMIs. As per CIBIL, home loan obligations declined YoY in the 3-month period ending December 2024. For price sensitive middle class home buyers, looking for homes priced between INR 50 lakh to INR 1.5 crore, there is hardly any inventory available in the market.
But then amidst all this worry about this dip in the residential market, there are many positives as well. Economy is holding steady and the government's big push to infrastructure is ramping up connectivity, opening up new affordable markets in Tier-2 cities. The beginning of the rate cut cycle with anticipated cuts in the coming months hold hope. Robust supply pipeline, reduced inventory overhang and healthy absorption, besides investors faith in Indian real estate are other bright spots. All this would paint an optimistic long-term picture. Will markets rebound and what future path residential realty will take. This will depend upon how demand-supply dynamics play out, especially in terms of increase in the supply of affordable and mid-priced homes. A lot will also depend upon how the global geo-political situation evolve, to what extent interest rates come down and what improvement economy and job market shows. Having said that, in the following quarters this year, we may not see aggression but a rather subdued yet stable market with adjustments in the upcycle.
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