India’s residential real estate market is poised for steady growth in the coming years, with sales volumes expected to increase by 5-7% and average prices set to rise by 4-6%. According to an analysis by Crisil, the trend of premiumisation in the market continues, with the luxury segment leading the way in new launches. However, this upward trajectory comes with a decline in the share of affordable housing launches, primarily due to rising land and construction costs. As the industry adjusts to post-pandemic normalcy, developers are shifting focus toward high-end homes, making the luxury segment a significant contributor to the overall market.
1. Stable Growth in Residential Real Estate Sales
Crisil’s analysis indicates that after the post-pandemic surge, the residential real estate sector in India will experience steady and stable growth over the next two years. Sales volumes are projected to grow by 5-7%, while prices are expected to appreciate at a more moderate pace of 4-6%. This stable growth comes after a period of rapid recovery and signals the market’s return to normalcy.
Key Insights:
- Residential sales are expected to grow by 5-7%.
- Average price increases to be moderate, with growth expected at 4-6%.
- The luxury real estate segment is leading the market, with significant growth in launches.
2. The Luxury Segment Takes Center Stage
The luxury housing segment is expected to account for a large portion of the new residential launches. Crisil’s analysis predicts that nearly 40% of all new launches in 2025 and 2026 will be in the luxury category. This marks a significant rise in demand for premium living spaces, driven by urbanization and an increase in disposable incomes.
The growth in the luxury segment has been particularly strong in India’s top seven cities, where the share of luxury housing launches surged from just 9% in 2020 to an expected 37% in 2024. This shift in demand is fueled by the desire for larger, more luxurious living spaces, which are increasingly seen as a symbol of status.
Luxury Housing Growth Projections:
- Nearly 40% of new launches in 2025-2026 will be luxury homes.
- Urbanization and rising incomes are fueling the demand for larger living spaces.
- Prices are expected to grow steadily at 4-6% over the medium term.
3. Affordable Housing Declines Amid Rising Costs
While demand for luxury homes surges, the affordable housing sector faces challenges. The affordable housing segment, which once accounted for 30% of new launches, is now expected to contribute only 10-12% of new projects in the next two years. This marks a sharp decline from its previous levels due to rising land and construction costs, which have made affordable housing less viable for developers.
Key Data on Affordable Housing:
- Affordable housing launches are expected to drop to 10-12% of total new launches.
- In 2020, affordable housing accounted for 30% of all new launches.
- Rising construction and land costs are major contributors to the decline.
4. Financial Stability for Developers
Despite the changes in market dynamics, developers are expected to maintain healthy credit profiles. Crisil’s analysis suggests that strong collections and deleveraged balance sheets will support the financial stability of real estate companies. This will enable developers to weather market fluctuations and continue investing in new projects, particularly in the premium and luxury segments.
Financial Outlook for Developers:
- Developers are expected to maintain strong credit profiles.
- Financial stability supported by healthy collections and deleveraged balance sheets.
Summary Table:
| Segment | Projected Growth in Sales | Projected Price Increase | Share of New Launches (2025-2026) |
|---|---|---|---|
| Luxury Housing | 5-7% | 4-6% | 38-40% |
| Affordable Housing | 5-7% | 4-6% | 10-12% |
| Mid-Income Housing | 5-7% | 4-6% | 19-20% |
Relevant Quotes:
- “The premium and luxury segments in the top seven cities have witnessed a significant surge, with their share of launches increasing from 9% in calendar year 2020 to 37% in 2024. This can be attributed to rising incomes and urbanization, which have fueled the desire for larger, more luxurious living spaces,” said Gautam Shahi, Director, Crisil Ratings.
- “As the trend of premiumisation continues, the premium and luxury segments are expected to account for 38-40% of total launches in 2025-2026. With growth normalizing in these segments, the average price is expected to grow at a steady rate of 4-6%,” Shahi added.
FAQ Section:
- What is the projected growth rate for residential real estate sales in India?
- Residential sales are expected to grow by 5-7% in the next two years, with prices increasing by 4-6%.
- Which segment is driving the majority of new real estate launches?
- The luxury and premium segments are expected to dominate, with nearly 40% of all new launches in 2025-2026 falling under this category.
- Why is the affordable housing segment shrinking?
- Rising land and construction costs have made affordable housing less viable for developers, resulting in a significant drop in new launches for this segment.
- How will the financial health of developers be affected by market conditions?
- Developers are expected to maintain healthy credit profiles, supported by strong collections and reduced debt levels, ensuring financial stability.
- What are the future prospects for the luxury housing market in India?
- The luxury housing market will continue to see growth, with steady price increases of 4-6% expected in the medium term.