How did Delhi-NCR and Mumbai housing prices surge by nearly 50% in five years?

Homebuyers in India's two biggest metros, Delhi-NCR and Mumbai, brace yourselves – housing prices have skyrocketed nearly 50% in the last five years! According to real estate consultant Anarock, this surge is driven by a potent combination of rising demand and increasing construction costs.

In Delhi-NCR, the average price per square foot has shot up from Rs 4,565 in H1 2019 to Rs 6,800 in H1 2024, a jump of 49%. Experts attribute this growth to robust demand, fueled by significant infrastructural developments and improved connectivity within the region. The NCR region's potential for sustainable growth and investment opportunities is particularly highlighted by TARC Ltd MD and CEO Amar Sarin, underlining the region's attractiveness.

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Mumbai's housing market followed a similar trajectory. Average prices here have climbed 48%, reaching Rs 15,650 per square foot in H1 2024, compared to Rs 10,610 in H1 2019. Interestingly, Anarock points out that prices in both regions remained stagnant from late 2016 to 2019. The Covid-19 pandemic, however, proved to be a turning point.

The catalyst behind this price surge has been an impressive uptick in sales coupled with strategic management of inventory. NCR reported the sale of approximately 2.72 lakh units, while MMR saw a staggering 5.50 lakh units change hands between 2019 and mid-2024. This surge in demand has effectively reduced unsold inventory by over 52% in NCR and 13% in MMR over the same period.

Pandemic paradox: from slump to boom

Ironically, the COVID-19 pandemic proved to be a turning point for these markets. Initially dampening prospects with uncertainty, it eventually spurred demand as home became not just a place to live, but also to work and study. Developers responded with attractive offers, kickstarting sales momentum that continues to drive the market today.

Supply Dynamics

The contrasting supply dynamics between NCR and MMR further illustrate their distinct paths to recovery. In NCR, cautious supply management played a crucial role in reducing inventory overhang from 44 months in early 2019 to just 16 months by mid-2024. During the same period, approximately 1.72 lakh new units were launched, reflecting strategic restraint in response to market dynamics.

Conversely, MMR adopted a more aggressive approach with substantial new launches totaling over 5.26 lakh units. This strategy aimed to meet burgeoning demand and resulted in a 14-month reduction in inventory overhang, dropping from 34 months to 14 months.

Is this a sustainable trend?

Whether this growth is sustainable remains to be seen. However, one thing's for sure: Delhi-NCR and Mumbai's housing markets are currently experiencing a period of unparalleled dynamism. So, if you're considering buying a home in either of these metros, be prepared for a competitive market and potentially higher price tags.

Related: Bengaluru's residential real estate market soars as prices shoot up by 32% year on year