Bengaluru's Real Estate Market: Luxury Homes Drive Growth, But Ultra-Premium Shows Early Fatigue
Bengaluru’s residential real estate market is on track for a steady expansion in FY2026, with area sold projected to rise 3–5%, primarily driven by mid-income and luxury housing demand. However, the ultra-premium segment is showing signs of fatigue.
Real EstateBengaluruLuxury HomesMidincome HousingMarket TrendsReal EstateNov 18, 2025
The city remains India’s fourth-largest residential market among the top seven metros—Mumbai Metropolitan Region, Delhi NCR, Bengaluru, Hyderabad, Pune, Kolkata, and Chennai—accounting for 14–15% of the total area sold between FY2021 and FY2025.
After recording a decadal high of 102 million square feet (msf) sold in FY2024 (reflecting a sharp 27% CAGR over FY2021–FY2024), Bengaluru saw a mild correction in FY2025, with area sold dipping 2% YoY to 99 msf. The decline, ICRA notes, was driven almost entirely by a 41% collapse in the affordable housing segment, which now contributes just 6% of total sales. In contrast, mid-income and luxury housing each grew 3% during the year, cushioning the overall decline.
FY2026 Off to a Strong Start
The momentum has carried into FY2026. Bengaluru clocked 52 msf in area sold during H1 FY2026, a 14% YoY increase. Sales in the second half of the year are expected to remain stable on an annual basis, with the launch pipeline heavily back-ended in Q4, ICRA said.
Supply Expands Rapidly as Launches Hit Record Levels
On the supply front, the city saw a significant upswing, with 124 msf of new residential launches in FY2025—representing a 34% CAGR over FY2021–FY2025. ICRA expects launches to rise 10–12% YoY in FY2026, supported by:
- Continued demand in the mid and luxury brackets (₹2.0–3.5 crore)
- Improvements in the e-khata process
- A strong Q4-led launch pipeline
- Launch activity remained firm in H1 FY2026, rising 7% YoY to 63 msf.
One of the most reassuring indicators for market stability is the Years to Sell (YTS) metric. ICRA noted that YTS for unsold inventory improved to a decadal low of 0.8 years in March 2024, down from a peak of 2.5 years in June 2020. Even though new launches outpaced sales in FY2025 and the first half of FY2026, the YTS remained comfortable at 1.1 years as of both March 2025 and September 2025.
By March 2026, the firm expects YTS to edge up to 1.2–1.4 years—still well within a healthy range—reflecting both the uptick in luxury launches and a slight moderation in sales velocity.
Luxury Homes Take the Lead, But Ultra-Luxury Shows Signs of Cooling
Perhaps the most striking trend picked up by ICRA is the changing consumer preference in Bengaluru’s residential market. Historically, demand was heavily anchored in the mid-income segment. But since FY2023, buyers have gravitated towards larger, premium homes, influenced by hybrid work models, lifestyle upgrades, and increased disposable incomes.
This shift is now showing up decisively in supply patterns: Luxury launches overtook mid-income launches for the first time in H1 FY2026, accounting for 49% of total launches. This is a steep rise from 37% in FY2025 and just 19% in FY2021.
However, momentum in the ultra-luxury segment has started to soften. ICRA warns that sales velocity for ultra-premium homes has slowed in recent quarters, which may prompt developers to take a more cautious approach to new launches in this niche category over the near to medium term.
Overall, ICRA projects steady, demand-driven growth for Bengaluru through FY2026. The mid-income and luxury segments will remain the cornerstone of the market.
Frequently Asked Questions
What is the projected growth in Bengaluru's residential real estate market for FY2026?
Bengaluru’s residential real estate market is projected to see a 3–5% increase in area sold in FY2026, primarily driven by mid-income and luxury housing demand.
How has the affordable housing segment performed in recent years?
The affordable housing segment saw a 41% collapse in FY2025 and now contributes just 6% of total sales in Bengaluru.
What are the key factors supporting the increase in residential launches in Bengaluru?
Key factors include continued demand in the mid and luxury brackets, improvements in the e-khata process, and a strong Q4-led launch pipeline.
What is the Years to Sell (YTS) metric, and why is it important?
The Years to Sell (YTS) metric measures the time it takes to sell unsold inventory. A lower YTS indicates a healthy market. ICRA noted that YTS for unsold inventory in Bengaluru improved to a decadal low of 0.8 years in March 2024.
What trend is ICRA observing in the ultra-luxury segment?
ICRA observes that sales velocity for ultra-premium homes has slowed in recent quarters, which may prompt developers to be more cautious about new launches in this niche category.
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