The Indian housing market is projected to experience moderate growth in both sales and new supply during the 2025-26 fiscal year, according to a recent report by the rating agency ICRA. While housing sales are expected to increase by a modest 1-4 percent, new supply is likely to grow at a faster pace of 6-9 percent, especially across the seven major cities. ICRA also predicts a 3-5 percent rise in average selling prices for residential properties, supported by the increasing dominance of the luxury housing segment and developers' pricing flexibility.
Sales Volume to See Modest Growth
The housing market in India is expected to see a modest rise in sales volume during the 2025-26 fiscal year. ICRA's analysis suggests that the total area sold across the seven major cities will likely grow by 1-4 percent. This slight increase comes in contrast to the decline observed in the previous fiscal year, where sales volumes fell by 4-7 percent due to a slowdown in new launches. Despite this decline, the market is expected to stabilize and witness growth driven by factors such as improving buyer confidence and sustained demand for housing, particularly in larger and established markets.
New Supply Set to Increase Amid Challenges
While housing sales are expected to grow modestly, the supply side is forecasted to grow at a stronger pace of 6-9 percent. The anticipated rise in new project launches is projected to reach around 620-640 million square feet in the 2025-26 fiscal year. This comes after a significant drop in new project launches in FY24-25, which fell by 14-17 percent compared to the previous fiscal year, due to approval-related challenges. Despite this setback, the forecasted growth in supply reflects a rebound in developer confidence and a strategic push towards catering to the rising demand for residential properties, particularly in top-tier urban markets.
Luxury Segment Drives Price Growth
ICRA's report also highlights a notable trend in the Indian housing market—the sustained increase in average selling prices. The agency notes that prices for residential properties in the top seven cities have consistently risen, with a 11 percent increase in both FY23 and FY24. This upward trajectory is expected to continue, with prices anticipated to grow by 13-15 percent in FY25. The primary driver behind this growth is the increasing share of luxury segment sales, which have been gaining momentum due to higher demand for premium properties in metropolitan areas.
For FY26, ICRA expects average selling prices to grow by 3-5 percent, reflecting both the shift toward higher-end homes and developers' pricing flexibility in response to favorable year-to-supply (YTS) conditions. The continued price escalation, particularly in the luxury segment, is likely to attract investors looking for premium real estate opportunities in India’s leading markets.
Stable Outlook Amid Market Consolidation
Despite the challenges faced in the housing sector, ICRA has maintained a stable outlook for the residential real estate market. The agency’s assessment is largely based on the consolidation trends in the industry, where larger, more established players continue to outperform smaller developers. This consolidation has created a more resilient and structured market, benefiting leading developers who are well-positioned to navigate the regulatory and market hurdles.
As the market stabilizes, ICRA anticipates that established players will continue to dominate the residential real estate space, both in terms of new launches and sales. Their ability to manage project timelines, navigate regulatory hurdles, and cater to evolving consumer demands is expected to drive consistent performance, regardless of the broader market dynamics.
Conclusion: A Gradual, Stable Growth Trajectory
India's housing market is poised for modest but steady growth in the coming fiscal year. With sales volume expected to rise by 1-4 percent, a notable increase in new project launches at 6-9 percent, and average selling prices predicted to grow by 3-5 percent, the outlook for the residential real estate sector remains positive. The luxury housing segment, in particular, will continue to drive much of the price appreciation.
While challenges like approval delays and regulatory obstacles persist, the long-term outlook for India's real estate market remains stable. Larger developers are well-positioned to weather the storm, benefiting from market consolidation and their ability to cater to the increasing demand for high-end properties. As the sector adapts to changing market conditions, the gradual growth in sales, supply, and prices will contribute to the ongoing development of India's dynamic housing market.
Comments