India Ratings and Research expects home prices to rise between 3% and 4% in fiscal 2026, as moderating demand and an increase in inventory levels weigh on growth prospects, according to a report released Monday, as published by the Financial Express.
The firm projects residential sales growth will slow to 9% year-over-year in FY26, down from an estimated 17% in FY25. Tier I developers are expected to maintain their resilience, while affordable housing continues to lose market share across major Indian cities.
Total residential sales are forecast to rise 17% year-over-year to 593 million square feet in FY25 before slowing to 9% growth in FY26, India Ratings said.
In the first nine months of FY25, average home prices across the top eight cities rose 8% year-over-year, compared to 21% in FY24 and 14% in FY23. Bengaluru recorded the highest price growth at 23% year-over-year, followed by the National Capital Region (NCR) at 13% and Pune at 12%.
India Ratings attributed the expected moderation in FY26 to a high base in FY25 and rising prices, which are up 8% to 10% year-over-year, impacting affordability.
Residential sales across the eight largest real estate markets—Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai Metropolitan Region (MMR), NCR, and Pune—grew 32% year-over-year in FY24, according to data from property research firm Liases Foras.
During the first nine months of FY25, MMR remained the largest micro-market with a 25% share among the top eight cities, followed by Hyderabad and Pune. Chennai posted the highest sales growth at 46% year-over-year during this period.
“FY26 is likely to see continued positive growth in bookings, although at a slower pace due to the base effect and moderation in affordability,” said Mahaveer Shankarlal Jain, director of corporate ratings at India Ratings. Jain noted that NCR, Bengaluru, and MMR are likely to remain relatively resilient in bookings, except for the luxury segment.
Developers are expected to continue seeing positive growth in collections and operating cash flows, resulting in strong balance sheets. Jain said sector consolidation and delayed launches amid limited unsold stock have helped maintain the financial health of developers.
Tier II and other developers performed strongly in FY24 and the first nine months of FY25, as buyers seeking alternatives to high-priced units from Tier I developers boosted their sales. However, India Ratings expects Tier I players to continue leading the market due to brand goodwill and customer trust, although the pace of market consolidation is anticipated to moderate in FY26.
Unsold inventory across the top eight cities increased slightly to 1,027 million square feet in the first nine months of FY25, compared with 1,017 million square feet during the same period a year earlier. Despite the rise in launches, the quarters-to-sell (QTS) ratio improved to about seven quarters, down from nine quarters a year ago, supported by an increase in trailing twelve months (TTM) average sales to 566 million square feet from 418 million square feet.
Demand patterns continued to show divergence, with affordable housing sales declining about 11% year-over-year in the first nine months of FY25 across the top cities. The affordable segment’s market share fell to 18% in FY24 from 27% in FY23, indicating a sustained weakening in demand.
Meanwhile, the mid-income segment captured the largest share of sales across several markets. Pune recorded a 52% share in the mid-income segment, followed by Ahmedabad at 43%, Bengaluru at 38%, and Chennai at 35%. Hyderabad and NCR saw a higher proportion of sales in the upper mid-income segment, at 45% and 22% respectively in FY24.