Low inflation boosts housing demand

With inflation expected to remain low and range-bound, given increased housing affordability and purchasing power, the environment is conducive for housing demand to revive


Naveen Kumar Saini/Mint
Naveen Kumar Saini/Mint

Affordability is a key factor in demand for homes. A note by property consultant JLL India says that individual purchasing power has improved over the last few years as income has risen at a faster rate than home prices. Importantly, the chart shows the strong inverse relationship (correlation of 82%) between inflation rate and growth in home loans. Therefore, reducing inflation will also infuse confidence in potential homebuyers as it has a strong influence on the decision to borrow to buy a house. In other words, lower inflation elevates consumer confidence through financial stability.

With inflation expected to remain low and range-bound, given increased housing affordability and purchasing power, the environment is conducive for housing demand to revive. Further, lower interest rates, the government’s move to bring in stringent regulations in favour of buyers, faster resolution of disputed property cases and higher discounts in the sector due to large inventory levels are other factors that could support consumer confidence.

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