India’s housing dream has been slipping out of reach for a while – but now the story seems to be becoming true even for the richie-rich.
Home prices in almost all large Indian cities are unaffordable. In cities like Mumbai and Gurgaon, buying a home demands decades of savings. In fact, as The Times of India reported on June 24, 2025, it would take 109 years of savings for the richest 5 percent of families in Mumbai to be able to buy a home to live in. In Gurgaon it would take 64 years. For Bengaluru and Delhi, the figure was at 36 years and 35 years respectively.
Now, these are average numbers, and like all average numbers they hide more than they reveal. Nonetheless, even if it would take half the number of years, the message is simple: Home prices in Indian cities have reached extremely high levels.
Multiple reasons have been offered to explain this phenomenon. Black money has been one. The fact that the top echelon of Indian society has been doing well is another. The easy availability of home loans is another possible reason.
While black money, inequality and easy loans are usual suspects, a new player is in town: SIP-fuelled stock market gains that may be quietly pushing up home prices.
This is a reason that’s barely talked about. All the money indirectly being invested into stocks through systematic investment plans (SIPs) run by mutual funds(MFs), along with all the retail money being directly invested into stocks, may be driving up home prices as well. How?
Take a look at the following chart. It plots the money being invested into mutual funds through the SIP route.
In 2024-25, Rs 2,89,352 crore was invested in MFs through the SIP route in comparison to Rs 1,99,219 crore in 2023-24. In fact, in April and May 2025, the first two months of the current financial year, Rs 53,320 crore has already been invested through SIPs.
Now, not all the money invested through SIPs is invested in equity MFs which in turn invest in stocks. Nonetheless, industry estimates suggest that nearly 90 percent of the money invested through SIPs finds its way into equity MFs, and a bulk of that gets invested in stocks.
So, money invested into MFs through the SIP route indirectly finds its way into stocks. Over and above this, retail investors in the last few years have bet big on investing directly in stocks as well. This can be gauged from the fact that the number of demat accounts – which are required to buy and sell stocks – stood at 19.7 crore as of May 31, 2025. They had stood at 3.9 crore in December 2019, before the covid pandemic started.
If we were to look at things from an economic perspective, the supply of retail money looking to buy stocks has gone up. This implies that the demand for stocks has gone up. In this scenario, the promoters/owners of companies and large investors have cashed in, by selling the shares that they own.
How do we know this? First, data from the National Stock Exchange (NSE) suggests that as of March 31, 2025, the promoter ownership in companies listed on this exchange, had fallen to a seven quarter low. This basically means that promoters have been selling their shares directly in the stock market – resulting in their ownership in the more than 2,000 companies listed on the NSE – falling.
Second, individual or retail investors owned a record 18.2 percent of these listed stocks, implying that a portion of the promoter selling is being picked by retail investors, investing either through the SIP route or directly. In fact, individuals now own a greater proportion of the stock market than the foreign institutional investors. This is the first time something like this has happened since 2006.
Third, promoters selling directly in the stock market seems to have continued in the current financial year as well. A report on moneycontrol.com published in late May 2025 pointed out that promoters had sold stocks worth Rs 58,000 crore during the course of the month.
Fourth, there have been many initial public offerings (IPOs) in the last few years trying to cash in on the positive sentiment in the stock market. An IPO can have two constituents. One, the company coming up with the IPO is looking to issue fresh shares and raise money. With this money it’s looking to expand its business, pay off debt and so on. And two, the company is looking to sell existing shares to public investors. This is referred to as an offer for sale. The existing shares may be owned by promoters or other investors.
Take a look at the following chart.
It plots the total amount of money raised through IPOs during the last five financial years. In 2024-25, Rs 1,63,682 crore was raised by firms through IPOs. Of this, around 60 percent or Rs 97,203 crore was offered for sale implying that promoters and other large investors who already owned shares sold out to public investors including retail investors.
To cut a long story short, promoters and other large investors have sold shares and retail investors have bought a chunk of it, thus providing an exit.. Now, the question is where has this money gone?
Before answering this question it’s important to understand why promoters have been selling chunks of their business. Usually, no one understands a business better than the people running it. And many of them seem to have come to the conclusion that the current share prices of their companies do not really justify their prospective future earnings, essentially implying that share prices of many firms are on the higher side. Hence, it possibly makes sense for them to sell.
The trouble is that there are very few investment opportunities to deploy these profits. And Occam’s Razor – a principle that says that the simplest explanation is usually the best one – seems to suggest that some of this money has been going into real estate, particularly premium real estate and driving up home prices on the whole.
When the price of premium real estate goes up it gets widely reported in the media. This sets new price benchmarks for the market for homes at large – or what psychologists and economists like to refer to as anchoring.
Small individual investors who had bought homes as an investment in the past, think that their homes are also worth more now. So, they get ‘anchored’ to the idea of higher home prices by looking at all the reports going around in the media.
The trouble is that not everyone is making the kind of money that the richie-rich are. Hence, a lot of such homes, which had been bought as an investment, lie unsold. Further, the brokers seem to be interested in selling newer homes being launched by builders and tend to push those.
The trouble is that the focus is usually on all the newer homes being built and sold, and also on premium homes, and there is no data or reporting on all the homes having been bought as an investment and which are lying locked.
This is how SIP money and the retail money being invested in stocks directly, have possibly been driving up home prices, leading to a situation where many of those looking for a home to live in not being able to afford them or possibly having to really stretch themselves financially to get there.
Along with this, it’s also possible that the high net worth individuals sitting on a lot of stock market gains are selling a part of their investment in shares and have been deploying that money in real estate.
To conclude, retail investors are fuelling a stock market surge, giving promoters a lucrative exit. But that money doesn’t vanish – it possibly flows into premium real estate, distorting prices across the board. The result? A housing market increasingly out of reach for many of those looking to buy a home to live in.
Of course, high home prices are a complex problem, and this is one possible explanation.
Vivek Kaul is an economic commentator and a writer.
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