Office leasing slips 2% as housing sales remain steady in H1: Knight Frank

Commercial leasing eased from last year's record high, while residential sales remained among the strongest in a decade as India's property market entered a phase of stabilisation

Office space leasing in India declined 2 per cent year-on-year (YoY) in the first half of calendar year 2026 (H1 2026) because of the high base of the corresponding period last year. Meanwhile, housing sales across the top Indian cities remained largely stable, signalling a phase of market stabilisation, according to real estate consultancy Knight Frank India.

 

Office leasing stood at 48 million square feet (msf) in H1 2026. While marginally lower than a year ago, the performance came after the record high achieved in H1 2025 and marked the second-best half-year leasing performance on record.

 

India's residential market, meanwhile, recorded one of its strongest first-half performances in more than a decade, with sales of 171,471 units during H1 2026, even as activity entered a phase of consolidation.

   

Developers launched 187,350 housing units during the period, up 4 per cent YoY. Knight Frank said that after four years of broad-based recovery from the pandemic-induced slowdown, the near-flat sales trajectory suggests the market is stabilising rather than continuing its rapid growth.

 

Shishir Baijal, international partner, chairman and managing director, Knight Frank India, said: "India's housing market continues to reflect the stability of its strong fundamentals, with H1 2026 delivering one of the strongest half-year sales performances of the past decade. While growth has moderated following a steep recovery from pandemic lows, the market's underlying fundamentals remain firmly intact."

 

Premium housing continued to dominate demand. Homes priced above ₹1 crore accounted for 54 per cent of total sales in H1 2026, compared with 49 per cent a year earlier.

 

"While this reflects genuine premium demand from higher-income households, it also showcases the progressive erosion of the affordable segment, as several years of sustained price appreciation have repriced mid-market inventory into higher price brackets," the report said.

 

Unsold inventory stood at 525,695 units at the end of H1 2026, up 4 per cent YoY. The quarters-to-sell ratio remained at six, which Knight Frank described as a healthy level.

 

Mumbai retained its position as India's largest residential market by sales volume, supported by sustained end-user demand across premium and mid-segment housing.

 

Bengaluru emerged as the strongest-performing residential market among the top cities, registering the highest annual sales growth of 5 per cent.

 

The National Capital Region (NCR) remained the weakest-performing market, with sales declining 7 per cent YoY to 24,862 units, extending the 9 per cent decline recorded in 2025. Knight Frank attributed the weakness to softer end-user demand and the impact of recent geopolitical uncertainty on buyer sentiment.

 

Residential prices continued to rise during H1 2026, although at a slower pace than in 2023 and 2024. Mumbai remained India's most expensive housing market, with average prices at ₹36,881 per square foot. Delhi and Faridabad recorded the highest price appreciation, with both markets posting 18 per cent YoY growth.

 

In the commercial segment, leasing remained resilient despite geopolitical tensions, global trade disruptions, artificial intelligence-led workplace transformation and continued uncertainty across major international office markets.

 

New office completions of 27.1 msf increased India's total office stock to 1,054.6 msf. Vacancy declined further to 14.6 per cent, reflecting occupier demand continuing to outpace fresh supply.

 

Global capability centres (GCCs) accounted for 43 per cent of office transactions, the highest share recorded in any half-year period, with leasing of 20.6 msf.

 

Flexible workspace operators, including managed office and co-working firms, leased 11.4 msf during H1 2026, accounting for 24 per cent of total office transactions, compared with 21 per cent a year earlier.

 

Bengaluru retained its position as India's largest office market with leasing of 14.1 msf during H1 2026.

 

Mumbai emerged as the standout performer, recording its highest-ever half-year office leasing volume of 7.3 msf, up 33 per cent YoY.

 

Knight Frank said third-party IT services accounted for 13 per cent of office leasing, or 6.4 msf, down from 22 per cent, or 10.9 msf, a year earlier. The moderation reflected workforce optimisation, cautious hiring and changing delivery models as AI adoption reshapes enterprise technology spending.

 

"While near-term demand has softened, India's technology services sector remains well positioned to benefit from the long-term shift towards AI-enabled, higher-value services," the report said.

 

Rental values increased across all eight major office markets during H1 2026 amid sustained occupier demand and falling vacancy. NCR recorded the highest rental appreciation at 13 per cent YoY, followed by Bengaluru at 8 per cent, and Chennai and Hyderabad at 7 per cent each.