by Deepak Sawant 
India’s Real Estate Crisis sector has been a hot topic in recent years. In cities like Gurugram, luxury flats are sold for ₹100-200 crore, yet during monsoon season, these same areas face severe flooding and traffic jams. Cities like Mumbai, Bengaluru, and Delhi are also facing similar problems. Despite these issues, real estate prices continue to rise, making it harder for common people to fulfill their dream of owning a home. In this article, we will analyze the data and reasons behind why real estate is so expensive in India and what the future might look like.
Price-to-Income Ratio: Measuring Housing Affordability
The price-to-income ratio is used worldwide to check if real estate is affordable. It shows how many years of a family’s total annual income are needed to buy a house.
For example, if a family earns ₹20 lakh per year and the house costs ₹1 crore, the ratio would be 5. A ratio of 5 or below means housing is affordable.
In India, the average price-to-income ratio in 2024 was 7.5, which increased to 8.8 in just one year.
- Mumbai: 15.1
- Delhi: 12.3
This shows buying a home in metro cities has become extremely difficult. In comparison, the U.S. average is 4.8.
Rental Yield: Measuring Returns on Property
Rental yield shows how much rent you earn annually compared to the property’s total price.
- Global average rental yield: 6-8%
- U.S. average: 8-12%
- India average: 2-4%
This clearly shows that buying property in India is not a great investment for rental income.
Why Real Estate is Expensive in India
Several factors are pushing real estate prices higher in India:
1. Urban Migration and Limited Land
About 37% of Indians live in urban areas, compared to 66% in China. As people move to metro cities for jobs, demand rises, but land availability remains limited, driving up prices.
2. Rising Construction Costs
In the last five years, construction costs have increased by 40%.
- Cement and steel prices rose by 35-57%.
- Copper prices increased by 91%.
- Labor costs jumped by 150% since 2019.
3. Shortage of Affordable Housing
India currently has a shortage of 94 lakh affordable housing units, which could rise to 3 crore in the next five years. Meanwhile, luxury housing sales have increased by 450%.
4. High Taxes and Government Charges
About 50-55% of a property’s price goes into taxes and charges like:
- GST
- Registration fees
- FSI charges
- Permission fees
5. Black Money and Speculation
Real estate has become a popular way to hide black money. Many people buy multiple flats purely as investments, without plans to live there. This creates artificial demand, pushing prices higher.
Will the Real Estate Market Crash?
It may seem like India’s real estate is in a bubble, ready to burst. However, a major crash seems unlikely right now.
Reasons:
- Real demand is still very high.
- Supply in urban areas is very limited.
- Population growth and urban migration are ongoing.
While minor price corrections are possible, a big drop in prices is not expected soon.
Possible Solutions
Solving India’s real estate crisis requires efforts from both the government and private companies:
- Create job hubs in Tier-2 and Tier-3 cities to reduce pressure on metros.
- Lower taxes on affordable housing projects.
- Improve public transportation and infrastructure.
- Increase transparency to reduce black money in real estate.
Conclusion
India’s rising real estate prices are the result of multiple issues — from limited land and high taxes to urban migration and black money. If development is spread across more cities and focus is placed on affordable housing, this crisis can be managed. Otherwise, buying a home will become even more difficult for ordinary Indians in the coming years.
Keywords: Indian real estate, price-to-income ratio, rental yield, affordable housing, real estate bubble, Gurugram luxury flats, urban migration, housing prices in India.
