India's Homebuyers Embrace Compact Homes as Prices Soar
In a significant shift, demand for 1-2 BHK homes in India surged to 54% of total searches in Q3 2025, driven by rising property prices and affordability concerns. Cities like Pune and Mumbai saw the highest price increases, while Delhi recorded the strongest demand growth.
Real EstateCompact HomesProperty PricesHousing DemandInfrastructureReal Estate PuneOct 06, 2025
The report found that overall housing demand grew 3.1% quarter-on-quarter (QoQ), even as supply expanded modestly by just 1% QoQ nationwide. On a yearly basis, however, new supply declined 4.5%, indicating that developers are still exercising caution amid rising input costs and delayed project approvals.
Pune emerged as India’s hottest housing market, recording a 41.4% year-on-year (YoY) jump in average residential prices. Mumbai followed with 29.6% YoY growth, while Greater Noida saw prices soar 27.3% YoY. Under-construction (UC) projects outperformed ready-to-move (RM) homes in terms of price appreciation. In Pune, UC property prices rose 29.1% QoQ, nearly double the 15.8% QoQ gain for ready homes, suggesting that homebuyers are betting on future growth and infrastructure-linked gains.
The Delhi-NCR region stood out this quarter as the country’s most active real estate hub. Delhi recorded the strongest quarterly rise in demand at 10.3%, followed by Noida (+6.3%) and Greater Noida (+3.8%). Analysts attribute this surge to large-scale infrastructure projects such as the Dwarka Expressway, Delhi–Meerut RRTS corridor, and the upcoming Noida International Airport — all of which are boosting buyer sentiment and long-term investment confidence.
Bengaluru maintained steady growth, with demand rising 5.9% QoQ and prices climbing 3.9% QoQ, reflecting a healthy mix of IT-sector resilience and ongoing infrastructure upgrades like the Peripheral Ring Road.
Chennai, however, presented a contrasting picture. The city saw a 5.4% drop in demand QoQ, even as supply expanded 1.9%, pointing to a temporary mismatch between developer launches and buyer preferences.
The July–September 2025 quarter reinforced a fundamental market shift toward compact and mid-segment housing. While affordability constraints are shaping buyer behavior, infrastructure-led optimism and evolving consumer aspirations continue to fuel demand across key micro-markets. Developers who align product offerings with affordability and lifestyle needs will define the next phase of sustainable housing growth, said Sudhir Pai, CEO, Magicbricks.
The PropIndex Q3 2025 findings reaffirm that India’s residential market is entering a phase of measured growth, shaped by affordability, infrastructure expansion, and evolving buyer aspirations. As compact homes gain ground and under-construction projects attract premiums, the balance between demand and supply will remain crucial in sustaining momentum. Looking ahead, housing activity is expected to be driven less by speculative trends and more by pragmatic, end-user decisions.
Frequently Asked Questions
What is the current trend in India's housing market?
The current trend in India's housing market is a shift towards smaller, more affordable homes, with a significant increase in demand for 1-2 BHK units. Property prices are also rising, particularly in major cities like Pune and Mumbai.
Which cities have seen the highest increase in property prices?
Pune and Mumbai have seen the highest increases in property prices, with Pune recording a 41.4% year-on-year jump and Mumbai a 29.6% increase.
Why is there a strong demand for compact homes?
The strong demand for compact homes is driven by affordability concerns and practicality, especially in a high-interest-rate environment. Buyers are prioritizing smaller, more affordable homes that meet their immediate needs.
What role do infrastructure projects play in the real estate market?
Large-scale infrastructure projects, such as the Dwarka Expressway and the Noida International Airport, are boosting buyer sentiment and long-term investment confidence in the real estate market, particularly in the Delhi-NCR region.
What is the outlook for the housing market in the coming quarters?
The outlook for the housing market is expected to be driven by pragmatic, end-user decisions rather than speculative trends. The balance between demand and supply will remain crucial in sustaining momentum, and developers who align with affordability and lifestyle needs will define the next phase of sustainable housing growth.
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