Inflation bites: Rising raw material prices, steady demand push home prices up 8%

A steady surge in raw material prices and stable demand have resulted in a significant rise in prices of residential homes across India. According to data from Anarock Research, average home prices in the country’s top seven markets have grown by 8 per cent at the end of June, compared with the year-ago period.

The average property prices in the top seven cities—Mumbai Metro Region (MMR), National Capital Region (NCR), Pune, Hyderabad, Kolkata, Chennai, and Bengaluru—have grown from Rs 6,001 per square-feet (sq.ft.) at June end 2022 to Rs 6,470 per sq.ft. at June end 2023. In fact, home prices have surged in all seven markets in the range of 6-10 per cent during the past one year.

Hyderabad recorded the highest annual jump in average per sq.ft. prices at 10 per cent—from Rs 4,520 to Rs 4,980. In markets like MMR, NCR and Bengaluru, the three largest markets in terms of units sold, average per sq. ft. prices have grown by 9 per cent over the past year. While home prices in Pune, Chennai and Kolkata grew in the tune of 6 per cent.

According to experts at Anarock, the growth in prices is largely due to increase in prices of construction materials costs and strong buyer demand. Realtors told Business Today that since the Russia-Ukraine war began in early-2022 prices of raw materials continue to remain at elevated levels, resulting in a 30-40 per cent rise in overall cost of construction.

Additionally, steady demand for residential homes is pushing prices up in the market. “The housing market is yet to feel the impact of the home loan rate hike early this year, and of the global economic headwinds. It continues to be on a roll with the momentum remaining strong even in the second quarter of 2023. On yearly basis, most top 7 cities saw significant jump in housing sales,” said Anuj Puri, Chairman, Anarock Group.

According to Pradeep Aggarwal, Founder and Chairman, Signature Global, this trend will continue. “We are set to witness another record year. End-users demand has strengthened, while investors are gradually returning to the market after seeing price appreciation after a decade of stagnation,” he said.