Rising home prices and rentals in large Indian cities could pose a new challenge to the RBI in its fight against inflation, even though headline consumer price rises have likely peaked, analysts warn. Housing rentals and ancillary costs have a 10.07% weightage in India’s consumer price inflation basket and are near three-year highs, posing a fresh worry for the RBI that had to contend with rising food prices for most of last year.

Housing has turned sticky and is being watched closely for indications of second-order effects, a senior official aware of the Reserve Bank of India’s (RBI) thinking said. Urban housing inflation rose to 4.47% year-on-year in December 2022, versus 3.61% in the same period a year ago and 3.21% in December 2020, data from the Ministry of Statistics and Programme Implementation showed.