The global economy significantly influences real estate markets, with factors such as inflation, interest rates, and investment trends impacting property prices worldwide. Despite affordability concerns, demand remains robust, particularly in the mid-income and luxury segments. According to CREDAI reports, property prices in key metropolitan cities have increased by 10 to 11 per cent year-over-year.

To address the strong demand for premium housing, developers are adopting innovative financing models and focusing on sustainable development. Foreign investments, regulatory reforms like RERA, and reduced stamp duties in key states like Maharashtra, Delhi-NCR, and Karnataka have enhanced transparency and investor confidence, driving sustained market growth. With home prices expected to rise by 6.5 per cent in 2025, homebuyers must assess these trends to make informed decisions in an evolving market.

Key drivers of property price appreciation The steady rise in property prices is primarily fuelled by strong demand and constrained new supply- Improved infrastructure, such as metro expansions, new highways, and smart city projects, has also significantly enhanced the attractiveness of key locations, pushing real estate values further.

Additionally, the growing influx of individuals into urban centers for better employment opportunities has significantly increased housing demand. Metropolitan areas like Mumbai have experienced an unprecedented population surge, further driving competition for residential properties. According to JLL, over 2,29,000 housing units were sold across the top seven cities between January and September 2024, a 17 per cent increase from the previous year. The Mumbai Metropolitan Region (MMR) led the market with approximately 1,55,335 units sold, highlighting a steady upward trend in property demand.

The boom in luxury housing A considerable section of India’s real estate market is experiencing a shift toward luxury housing, which is modifying demand patterns. In Mumbai’s prime localities, such as Bandra and South Mumbai the demand for high-end residences has intensified, further driving up real estate values. Buyers are prioritizing expansive layouts, world-class amenities, and prime locations, making luxury properties a focal point of investment. Developers are responding to this sentiment by offering larger spaces, state-of-the-art facilities, and sustainable features, catering to the evolving dynamics of the premium real estate market.

Infrastructure’s role in property appreciation Infrastructure development has emerged as one of the strongest catalysts in the real estate sector. The Mumbai Metropolitan Region (MMR) serves as a prime example, where transformative projects like the Mumbai Trans Harbour Link (MTHL), Mumbai Coastal Road Project and metro network expansions have significantly boosted real estate demand. Such developments enhance connectivity and accessibility, making previously underdeveloped areas attractive for homebuyers. This trend is expected to continue in 2025, with more transit-oriented developments and infrastructure initiatives in the pipeline, further influencing real estate values across urban and suburban landscapes.

Impact on rental markets and investment trends The surge in property prices has also reshaped rental markets across major cities. Higher purchase costs have translated into increased rental yields. In cities like Mumbai and Bengaluru, rental values have surged by 12 to 15 per cent over the past year due to strong demand and limited supply in prime locations.

Investors are increasingly shifting their focus toward rental income as a stable revenue stream, particularly in high-demand areas populated by working professionals and expatriates. This shift has reinforced the appeal of real estate as a long-term investment avenue, providing both capital appreciation and rental income. This has led to an escalation of property prices, thus impacting the current real estate scenario.

Foreign investments & NRI interest in Indian real estate The consistent demand in the Indian real estate market has made it a preferred investment destination for Foreign Direct Investment (FDI) and Non-Resident Indians (NRIs). With property values steadily appreciating, investors view the sector as a stable and lucrative asset. Moreover, NRIs are also playing a growing role in India's real estate market, which is driven by favourable exchange rates and strong economic growth. Their share in the sector has increased from 10 per cent in 2019-2020 to approximately 15 per cent, with projections indicating it could reach 20 per cent by 2025. Attracted by high returns and long-term growth potential, NRIs primarily invest in luxury homes, rental properties, and commercial spaces, further fueling demand in key real estate markets.

Additionally, government initiatives such as relaxed FDI norms and RERA regulations have further strengthened investor confidence, making Indian real estate an attractive and secure investment avenue. With rising property prices, India’s real estate sector is evolving dynamically, so homebuyers and investors must stay informed about these trends to navigate the market effectively. As projections indicate continued growth, making strategic real estate decisions will be crucial in this rapidly transforming landscape.

The article is authored by Ayushi Ashar, Director of Ashar Group and a Managing Committee Member at MCHI-CREDAI.