India’s residential real estate sector is expected to face a marginal slowdown in the coming financial year, driven primarily by rising property prices and affordability constraints, according to a report by ICRA titled “Residential Housing Outlook FY2026 – Affordability and Market Dynamics”. The report assesses housing trends across the country’s top seven cities, highlighting price movements, sales volume, new project launches, and market segmentation.
The report notes that average selling prices (ASP) of residential units have increased significantly over the last three years. From FY2023 to FY2025, the ASP rose by nearly 10% annually. In FY2025 alone, the ASP jumped by 16%, reflecting a substantial increase in construction and land costs, as well as the growing preference for premium housing. ICRA projects that prices will rise by an additional 6–8% in FY2026. This trajectory is expected to exert pressure on buyer affordability, potentially slowing down overall housing sales.
Based on the analysis, the total area of residential units sold in the top seven cities—Delhi NCR, Mumbai Metropolitan Region (MMR), Bengaluru, Chennai, Pune, Hyderabad, and Kolkata—is projected to decline by 0–3% in FY2026, reaching between 620 and 640 million square feet. The slowdown comes after a period of robust sales growth at a compound annual growth rate (CAGR) of 26% between FY2022 and FY2024, which reflected strong demand, particularly in the mid-income and affordable segments.
In FY2025, the real estate market entered a phase of equilibrium, with total area sold decreasing by 8% to 643 million sq ft. The decline was driven by a drop in new launches and moderation in sales velocity, especially in affordable and mid-income projects. ICRA estimates that new project launches will increase modestly by 4–7% in FY2026, amounting to 630–650 million sq ft. This growth is expected to be supported by residual demand from previous years and manageable unsold inventory levels.
The report emphasizes that developers’ calibrated launch strategies have helped maintain a balanced inventory. The years-to-sell (YTS) metric, which indicates the time required to sell existing stock, is projected to remain healthy at 1.0–1.1 times by March 2026. Anupama Reddy, co-group head and vice president, Corporate Ratings, ICRA, noted that the ASP increase is being driven by the growing share of the luxury segment, low inventory overhang, and consolidation among prominent listed developers who now command stronger pricing power.
The luxury segment has continued to perform robustly despite an overall market slowdown. In FY2025, area sold in the luxury segment increased by 6%, while sales in affordable and mid-income segments declined by 14% and 10%, respectively. Early data for Q1 FY2026 indicates a continuation of this trend, with year-on-year declines of 4.6% in sales and 4.1% in new launches in the broader market. However, luxury housing’s share of total sales has risen from 30% in FY2024 to 34% in Q1 FY2026.
The report also highlights the structural changes in the real estate sector resulting from policy reforms such as the Real Estate Regulatory Authority (RERA) compliance framework and the Goods and Services Tax (GST). These measures have accelerated consolidation, forcing weaker or non-compliant players to exit or lose market share. Reddy noted that key listed developers now account for approximately 20% of total sales value in FY2025, up from 13.1% in FY2020, reflecting increasing buyer confidence in developers with a track record of timely project delivery.
Furthermore, the report indicates that these leading developers have deleveraged significantly over the past 2–3 years, supported by robust sales collections and strong operating cash flows. While some increase in debt levels is expected in FY2026 to fund ongoing construction and growth initiatives, leverage is anticipated to remain manageable due to steady receivables and consistent construction progress.
ICRA’s analysis concludes that while affordability concerns are likely to constrain volume growth, the outlook for India’s residential real estate sector remains stable. The market is expected to continue transitioning toward higher-end housing and consolidating around established developers, with medium-term growth supported by demand from urban centres and manageable inventory levels.
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