Housing sales to remain steady at 10-12% on luxury demand, low rates

Crisil report says demand will rebound in FY26 driven by premium and luxury housing across major micro markets; affordable housing launches remain limited

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Residential sales across key Indian markets are expected to remain stable at 10 to 12 per cent for the financial year 2025-26 (FY26) due to lower interest rates and increasing premiumisation among buyers, according to a study by research agency Crisil.

 

The report stated that a steady sales growth will be coupled with a 5 to 7 per cent increase in volumes and average prices seeing a 4 to 6 per cent appreciation, driven largely by premium and luxury homes.

 

Based on an analysis of 75 real estate companies that account for 35 per cent of the country’s residential sales, the report added that the affordable and mid-segments are likely to account for a relatively low share of launches, at 10 to 12 per cent and 19 to 20 per cent, respectively for 2025 and 2026 calendar years (CY). 

 

Analysts believe this is due to rising land and raw material costs, rendering these segments less viable for developers.

 

It added that while supply is expected to continue exceeding demand, inventory levels should also inch up this and next financial year.

 

In the three financial years through 2025, sales clocked a compound annual growth rate (CAGR) of around 26 per cent, whereas demand clocked 14 per cent CAGR during the same period, with the balance being contributed by the growth in realisations.

 

“Last financial year, demand was flat because of elevated capital values and delay in launches in some cities due to state elections and changes in property registration rules,” the report said.

 

The demand is now expected to rebound, driven by improving affordability on account of lower interest rates and normalisation of price growth.

 

However, strong collections and deleveraged balance sheets of developers are expected to help developers keep their credit profiles healthy.

 

In anticipation of robust demand growth, developers ramped up launches, resulting in overall supply outpacing demand during the period.

 

“As supply is likely to continue outpacing demand this financial year and the next, the inventory is likely to inch up to 2.9 to 3.1 years from 2.7 to 2.9 years in the previous two financial years,” the Crisil report said. 

 

Demand growth will further be supported by sustained demand for premium and luxury houses and smoother launches across key micro markets, as the previous issues causing delays in launches abate.

 

Commenting on the same, Gautam Shahi, director at Crisil Ratings, said that the premium and luxury segments in the top seven cities have witnessed a significant surge, with their share of launches increasing from 9 per cent in CY 2020 to 37 per cent in CY 2024.

 

“This can be attributed to rising incomes and urbanisation, which have fuelled the desire for larger, more luxurious living spaces. As the trend of premiumisation continues, the premium and luxury segments are expected to account for 38 to 40 per cent of total launches in CY 2025 and 2026,” he added.