India's real estate market shows a complex landscape as unsold housing inventory decreases, yet challenges persist in the affordable housing segment. Unsold stock across major cities has fallen by 4% year-on-year, primarily driven by strong sales. However, luxury housing inventory continues to rise, largely due to increased supply over the last couple of years. Meanwhile, affordable housing has faced a severe downturn, with sales plunging during the pandemic and slow recovery. This article explores the current dynamics of the Indian housing market, highlighting the shifting focus towards premium properties and the ongoing challenges in the affordable segment.
The Decline in Unsold Housing Stock
India's housing market has witnessed a notable shift as unsold housing inventory across the country's top seven cities dropped by 4% annually by the end of March 2025. According to data from leading real estate consultancy Anarock, unsold homes at the close of the first quarter stood at 5.6 lakh units, a slight reduction from the 5.8 lakh units recorded during the same period in 2024. This decline is attributed to strong sales, which have helped absorb excess supply in the market.
The seven cities included in the analysis — Delhi-NCR, Mumbai Metropolitan Region (MMR), Kolkata, Chennai, Bengaluru, Hyderabad, and Pune — are home to some of the country's largest real estate developments. Despite the decline in overall unsold inventory, the distribution across different price segments paints a more nuanced picture.
Pricing Segments: Luxury Homes in Focus
While sales have picked up in some areas, the story of unsold stock varies significantly across price brackets. The most notable development has been the growing inventory of luxury homes. The number of unsold units priced above Rs. 1.5 crore surged by 24% to 1,13,193 units in March 2025, compared to 91,125 units a year earlier. This increase is largely driven by the significant supply additions in the luxury housing sector in recent years.
Anarock's Chairman, Anuj Puri, attributes this growth in luxury housing to the high demand for premium properties, which has outpaced the supply. However, it is important to note that this sector's growth could be due to the delayed absorption of inventory, as buyers in this segment tend to make more deliberate purchasing decisions, leading to longer periods of unsold stock.
Affordable Housing Struggles
On the flip side, affordable housing — traditionally a key focus for real estate developers — has faced the sharpest downturn. Unsold inventory for homes priced under Rs. 40 lakh fell by 19% to 1,12,744 units by the end of March 2025, compared to 1,39,905 units the previous year. This decline, however, does not indicate a sharp recovery. Instead, it reflects a dwindling number of affordable housing projects in the pipeline.
Puri highlighted that affordable housing has borne the brunt of the pandemic's economic fallout, with both sales and new launches suffering a substantial decline. The pandemic-induced slowdown, coupled with rising land prices and higher input costs, has made the development of affordable housing increasingly challenging. In fact, the share of affordable homes in total sales and launches has been shrinking steadily over the last five years. Developers, faced with escalating construction costs and a shift in buyer preferences, are now focusing more on premium and luxury segments, where the margins are higher.
Sales and Launch Activity: A Declining Trend
Sales and new launches have also experienced a slowdown in the first quarter of 2025. Housing sales during the January-March period plummeted by 28% to 93,280 units in the top-seven cities, compared to over 1.3 lakh units in the same period last year. This drop is a reflection of the broader economic challenges, including inflationary pressures, higher interest rates, and subdued consumer sentiment.
Moreover, new housing launches have also seen a decline. Developers launched 1,00,020 units across the top-seven cities in Q1 2025, marking a 10% decrease from the 1,10,865 units introduced during the same period in 2024. This reduction in new launches is indicative of developers’ cautious approach as they recalibrate their strategies in response to shifting market conditions and rising construction costs.
The Luxury Housing Market: A Bright Spot Amidst Challenges
Despite the overall challenges facing the housing market, the luxury housing segment remains resilient. The rise in high-end housing is largely attributed to demand from the affluent buyer segment, including those looking for larger homes, better amenities, and more privacy in a post-pandemic world. The shift in lifestyle preferences, coupled with the economic resilience of India’s upper middle class and wealthy segments, has resulted in strong demand for luxury properties. This trend is further boosted by rising disposable incomes in urban centers and the growing presence of international investors looking for premium properties in India.
The sustained interest in luxury homes has allowed developers to focus on premium segments, with an increased supply of luxury units. However, the challenge remains for developers to balance this demand with inventory that remains unsold, especially as construction costs continue to rise.
Conclusion: A Divided Market
In conclusion, India’s real estate market continues to experience a dual-phase recovery. While unsold inventory has decreased overall, the trends across different price segments show contrasting developments. The affordable housing sector is still grappling with low demand and high costs, while the luxury segment has witnessed sustained growth despite higher levels of unsold stock. As real estate developers increasingly turn their focus to premium homes, it is clear that the market’s future will be shaped by shifting buyer preferences, cost structures, and the ongoing effects of the pandemic. For now, the luxury sector remains the focal point, while affordable housing faces an uphill battle in the post-COVID landscape.
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