Mumbai, Delhi-NCR and Pune Lead the Decline

Mumbai recorded the steepest absolute drop, with sales falling 7 per cent to 23,185 units from 24,931 units in Q1 2025. The city remains India’s largest residential market by volume but faces mounting affordability pressure as average ticket sizes climb beyond Rs 1.5 crore in most micro-markets.

Delhi-NCR sales declined 11 per cent to 12,734 units, while Pune mirrored the slide with an identical 11 per cent drop to 12,711 units. Knight Frank attributed the NCR slowdown partly to global uncertainties, including the US-Iran conflict, which dampened investor confidence during the quarter.

Southern Markets Show Resilience

In contrast to the northern and western markets, demand in southern India remained firm. Bengaluru grew 5 per cent to 13,092 units, supported by sustained technology sector hiring and a steady flow of new professional migrants. Hyderabad edged up 1 per cent to 9,541 units, and Chennai outperformed all cities with a 9 per cent increase to 4,763 units.

Ahmedabad and Kolkata also recorded positive growth, reinforcing the view that India’s real estate market is increasingly divergent across geographies rather than moving as a single bloc.

Luxury Segment Continues to Outperform

Despite the overall dip, luxury and premium housing maintained strong momentum. Premium housing prices rose up to 36 per cent in early 2026, driven by India’s expanding base of high-net-worth individuals and a preference for amenity-rich, branded developments.

ANAROCK Group Chairman Anuj Puri noted that “the luxury segment is the most resilient corner of the market.” While mid-income and affordable segments face headwinds from rising prices, ultra-premium projects in Mumbai’s Worli and South Delhi’s Lutyens zone continue to sell out within weeks of launch.

New Supply Also Moderates

New residential launches fell 2 per cent to 94,855 units during the quarter. NCR recorded the sharpest decline in new launches at 8 per cent, followed by Hyderabad and Kolkata at 6 per cent each. Bengaluru, Chennai and Ahmedabad bucked the trend with increased launch activity, reflecting stronger developer confidence in these markets.

The supply moderation may prove beneficial in the medium term. With unsold inventory declining steadily over the past three years, developers have maintained pricing discipline. RERA compliance and improved transparency have also contributed to healthier market dynamics compared to the 2015-2019 period.

Outlook for the Rest of 2026

Analysts expect the second half of 2026 to see a gradual recovery as geopolitical tensions ease and interest rate stability supports buyer confidence. The impact of rising oil prices and the weak rupee on India’s broader economy will be a key variable. For now, the business landscape in Indian real estate remains cautiously optimistic, with fundamentals intact despite the quarterly dip.

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The trend marks a deepening of the two-speed dynamic in Indian real estate: the luxury and premium end continues to boom, while the affordable housing segment (below Rs 45 lakh) faces slower absorption and rising unsold inventory. This divergence has significant implications for developers, investors, and the broader Indian economy, which relies on real estate for roughly 7 per cent of GDP and 15 per cent of total employment.

Where Prices Are Rising Fastest

Savills India’s latest data shows that under-construction premium homes outperformed completed assets in terms of price appreciation during the past 12 months. Capital values in this segment rose as much as 36 per cent YoY across major cities, reflecting higher launch benchmarks, increasing land and construction costs, and robust demand.

NOIDA recorded the widest range of appreciation at 9 to 36 per cent YoY, driven by the Noida International Airport development at Jewar and upgraded expressway connectivity. Gurugram followed with a 2 to 19 per cent YoY increase, concentrated along the Dwarka Expressway and Southern Peripheral Road corridors. Bengaluru posted healthy gains of 13 to 15 per cent YoY, supported by IT-sector hiring and infrastructure upgrades including the Phase 2 metro expansion.

Completed premium homes showed steadier but still resilient growth, with values rising up to 20 per cent YoY. Bengaluru led this segment at 12 to 14 per cent, followed by Delhi (10 to 18 per cent) and NOIDA (10 to 20 per cent). Mumbai saw a more modest 4 to 7 per cent increase, though select micro-markets in the Bandra-Kurla Complex corridor outperformed significantly.

The Broader Market Picture

The 1 Finance Housing Market Index, based on RERA-registered transaction data, delivered a 10.2 per cent CAGR over five years, reaching 276 in December 2025. While earlier growth was driven by strong end-user momentum, the current phase is more measured, with inventory discipline shaping outcomes across cities.

New launches are expected to exceed 300,000 units in 2026, with Cushman and Wakefield projecting that the luxury segment will account for over 30 per cent of all new launches — up from 22 per cent in 2024. This shift reflects developers’ strategic pivot toward higher-margin products as land costs and regulatory compliance expenses under RERA continue to rise.

However, not all markets are thriving equally. Same-quarter absorption rates — the percentage of newly launched units sold within the quarter — softened through 2025 in Hyderabad, Delhi NCR, and Bengaluru for non-premium segments. Total housing sales data from earlier in 2026 confirms that the affordable segment is under pressure from inventory build-up and cautious buyer sentiment.

What Is Driving Premium Demand

Several factors are converging to sustain demand in the luxury segment. First, India’s growing high-net-worth population — estimated at 8.5 lakh households in 2026 — is increasingly viewing real estate as both a lifestyle asset and inflation hedge. Second, NRI buyers, attracted by a weaker rupee and improved RERA transparency, have significantly increased purchases in Bengaluru, Goa, and parts of Mumbai, according to industry data.

Third, the post-pandemic preference for spacious homes with wellness amenities, private terraces, and work-from-home infrastructure has persisted. Developers who invested in sustainable design — green-certified buildings, EV charging, and energy-efficient construction — are seeing faster sell-through rates and are commanding 10 to 15 per cent premiums.

The impact on personal finance and investment patterns is notable: the Union Budget 2026’s enhanced tax deductions for home loans up to Rs 5 lakh annually have further incentivised ownership in the premium segment, particularly among salaried professionals in the Rs 25 lakh to Rs 50 lakh annual income bracket.

Outlook and Risks

Analysts remain cautiously optimistic. Knight Frank India forecasts that residential prices across the top eight cities will rise 6 to 10 per cent in 2026, with the premium end outperforming the average. However, risks include the impact of global geopolitical tensions on financial markets and the RBI’s interest rate trajectory — any delay in anticipated rate cuts could slow mortgage demand in the second half of the year.

For buyers, the window for value purchases may be narrowing in high-growth corridors like NOIDA and Bengaluru’s outer ring road, where prices have already moved substantially. For developers, the challenge is maintaining quality and delivery timelines to justify premium pricing — a crucial factor as RERA enforcement tightens nationwide.

Source: Economic Times

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