Housing Sales Expected to Dip by 3% in FY2026 Due to Affordability Concerns: ICRA
ICRA projects a 0-3% decline in housing sales across India’s top seven cities in FY2026, driven by rising prices and affordability issues. The luxury segment, however, continues to show resilience.
Real EstateHousing SalesIcraAffordabilityLuxury HousingReal Estate NewsSep 11, 2025
A significant rise in the ASP of residential units by more than 10% annually from FY2023 to FY2025 continues to pose a drag on affordability for buyers. Owing to this, as well as expected moderation in sales velocity, ICRA projects the area sold in the top seven cities in India to decline by 0-3%, reaching 620-640 million square feet (msf) in FY2026, it noted in its analysis.
After witnessing strong residential sales growth at a compound annual growth rate (CAGR) of 26% between FY2022 and FY2024, the real estate sector entered a phase of equilibrium in FY2025, a trend expected to continue into FY2026. In FY2025, the total area sold declined by 8% to 643 million sq ft, driven by a sharp drop in new launches and a slowdown in sales velocity, particularly in the affordable and mid-income segments, it noted.
After a 14% decline in FY2025, ICRA estimates launches to increase by 4-7% to 630-650 msf in FY2026 across the top seven cities. This is likely to be supported by the spillover from the previous year and the current comfortable unsold inventory levels, it said in an analysis.
“The calibrated launches by developers helped in maintaining a comfortable inventory level, despite moderation in sales momentum in the broader residential market. Consequently, the years-to-sell (YTS) metric is estimated to remain healthy at 1.0-1.1 times by March 2026,” said Anupama Reddy, co-group head and vice president, Corporate Ratings, ICRA.
The ASP rose by 16% in FY2025 and is projected to further increase by 6-8% in FY2026. This is being driven by the increasing share of the luxury segment, low inventory overhang, and comfortable YTS, as well as consolidation in the industry with better pricing power for the prominent listed developers, she said.
In FY2025, the area sold in the luxury housing segment rose by 6%, while sales in the affordable and mid segments fell by 14% and 10%, respectively. This trend continued in Q1 FY2026, with year-on-year decline of 4.6% in sales and 4.1% in new launches. Despite the overall slowdown, luxury housing remains strong, with its share of total sales rising to 34% in Q1 FY2026, up from 30% in FY2024, as per ICRA.
Policy reforms such as the Goods and Services Tax (GST) and the Real Estate Regulatory Authority (RERA) compliances have brought about a structural shift in the industry and have accelerated the pace of consolidation in the sector while adversely impacting weaker entities. Further, players with significant delays in project execution have faced penalties in RERA and other litigations, resulting in the ceding of market share to reputed developers, it noted.
Commenting on the consolidation in the sector, Reddy said: “The share of key listed developers increased to around 20% of the total sales value in FY2025 from 13.1% in FY2020. This shift reflects growing buyer confidence in reputed developers, particularly during the under-construction phase, driven by their strong track record and timely project delivery. Industry consolidation is expected to persist over the medium term, with prominent listed players likely to outperform broader market trends.”
These developers have substantially deleveraged over the past 2-3 years, supported by robust sales, healthy collections, and strong operating cash flows. While debt levels may see a moderate uptick in FY2026 to fund construction and growth initiatives, the leverage position is expected to remain comfortable, backed by steady growth in collections, committed receivables, and ongoing construction progress. Overall, the outlook on the residential real estate sector remains stable, she added.
Frequently Asked Questions
What is the projected decline in housing sales for FY2026?
ICRA projects a 0-3% decline in housing sales across India’s top seven cities in FY2026.
How much have housing prices increased from FY2023 to FY2025?
Housing prices have risen by nearly 10% annually from FY2023 to FY2025.
What is the expected increase in average selling prices (ASP) in FY2026?
The ASP is projected to increase by 6-8% in FY2026.
How has the luxury housing segment performed compared to affordable and mid-income segments?
In FY2025, the area sold in the luxury housing segment rose by 6%, while sales in the affordable and mid segments fell by 14% and 10%, respectively.
What factors are driving the increase in ASP?
The increase in ASP is being driven by the increasing share of the luxury segment, low inventory overhang, and comfortable years-to-sell (YTS) metric, as well as consolidation in the industry with better pricing power for prominent listed developers.
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