A recent report from the real estate industry highlights a notable trend in the Indian market: Property prices are outpacing inflation, positioning real estate as an attractive investment option.

Key Findings:

Housing prices have experienced a compound annual growth rate (CAGR) of 13 percent over the past two years. This growth significantly surpasses the Consumer Price Index (CPI) inflation, which moderated to 5.4 percent at the end of FY24. The report underscores real estate's increasing appeal as a hedge against inflation, offering both rental income and capital appreciation.

Steady demand fuels price rise:

The industry attributes the consistent rise in real estate prices to ongoing population growth and urbanization. As more people migrate to cities seeking better opportunities, the escalating demand for housing drives property prices upward. The report highlights that this rising demand is a primary factor in price appreciation.

Beyond Capital Gains: Rental Income Advantage:

Real estate investments not only promise capital appreciation but also generate rental income. The industry report points out that as the cost of living increases, landlords typically adjust rental rates, ensuring that rental income grows alongside inflation. This provides investors with a dual benefit.

Leveraging Real Estate for Further Investment:

The report also delves into leveraging real estate assets for further investments. Investors can use their existing properties as collateral to borrow funds and acquire additional properties. This aspect enhances the attractiveness of real estate as an investment option.

Rental Growth Trends in Major Cities:

A recent industry report indicates a significant shift in rental trends across India's seven largest cities. While the second quarter typically sees a rise in rents due to student relocation and new employee hiring, 2024 has shown a moderation in growth. This coincides with a substantial increase in new
housing supply across these cities.

Diversification and Portfolio Risk Mitigation:

The report emphasizes the diversification benefits of including real estate holdings within a broader investment portfolio. Unlike financial assets like stocks and bonds, which can be negatively affected by inflation, real estate provides a tangible asset with intrinsic value. This diversification strategy
helps investors mitigate overall portfolio risk and potentially achieve higher long-term returns.

Looking Ahead: Continued Outperformance:

The sustained appreciation in housing prices, combined with moderated inflation, suggests that real estate will likely continue to outperform as an investment. This trend reinforces the importance of real estate as a crucial component of a well-diversified portfolio, concludes the industry report.