India's Housing Market Faces 14% Decline in Q2 2025: Affordability and Economic Uncertainty to Blame
The top eight residential markets in India saw a 14% decline in home sales year-on-year during the April–June quarter of 2025, driven by affordability issues and rising prices. MMR and Pune reported the sharpest drops, falling 32% and 27%, respectively.
Housing MarketReal EstateHome SalesAffordabilityEconomic TrendsReal Estate PuneJul 15, 2025
The report shows 97,674 units were sold during the quarter, down from 113,768 units a year earlier. The decline was broad-based, with six of eight tracked markets posting a contraction in sales. The Mumbai Metropolitan Region (MMR) and Pune reported the sharpest drops—MMR fell 32% year-on-year, and Pune declined 27%.
“The short-term dip in home sales and new launches is more of a recalibration than a sign of waning demand,” said Sridhar Srinivasan, Head of Sales at PropTiger.com. “Affordability pressures, particularly in the budget and mid-income segments, have led to some cautious buyer sentiment. However, underlying demand remains intact, as evidenced by strong sequential growth in several cities.”
Why Are Housing Sales Declining?
The cooling in sales is largely attributed to affordability constraints, with home prices rising even as income levels remain relatively flat for many in the urban middle class. Elevated interest rates, higher input costs for developers, and limited government incentives in the affordable segment have further strained purchasing power.
“Incomes haven’t kept pace with property price increases,” said a senior market analyst. “While luxury and premium segments are seeing traction, the bulk of India’s housing demand sits in the affordable and mid-range brackets. That’s where the pain is being felt the most.”
Recent geopolitical tensions, including the India–Pakistan border escalation, have also dampened sentiment. Many prospective buyers, particularly those relying on home loans, have deferred purchase decisions amid macroeconomic uncertainty.
City-wise Trends: A Mixed Bag
Despite the national decline, Chennai (+33%), Bengaluru (+16%), and Kolkata (+19%) recorded strong year-on-year growth in home sales. These cities have benefited from relatively stable pricing and sustained demand from IT professionals and local buyers.
In contrast, MMR saw sales drop from 38,266 units in Q2 2024 to 25,939 units in Q2 2025, reflecting demand fatigue at high price points. Pune followed with a fall to 15,962 units from 21,925 units a year earlier.
On a sequential basis, sales remained mostly stable, with marginal growth in several cities. Bengaluru rose 33% quarter-on-quarter, Chennai by 11%, and Delhi-NCR by 19%, indicating that demand has shifted rather than disappeared.
Developers Hit Pause on New Launches
Developers have responded cautiously to the softening demand, slowing the pace of new project launches. New supply declined 17% year-on-year and 10% quarter-on-quarter, with 84,138 units launched in Q2 2025.
MMR (-43%), Pune (-39%), and Ahmedabad (-36%) recorded the steepest declines in new launches. Chennai, Hyderabad, and Delhi-NCR bucked the trend, where developers responded to consistent demand with increased launches.
Kolkata saw a 192% surge in new launches, albeit on a lower base, reflecting developer interest in tapping unsaturated markets.
Developers are also focusing more on the premium segment, which remains relatively insulated from affordability challenges. “We’re seeing clear intent from developers to stay invested—especially in premium offerings—amid a wave of strategic land acquisitions in the first half of 2025. This signals long-term confidence in India’s housing market,” Srinivasan added.
Affordability Index Flashing Red
Industry trackers note that the housing affordability index—measuring the ratio of home price to income—has weakened in several cities over the last 12 to 18 months. For many prospective buyers, especially first-time homeowners, rising EMIs, higher down payments, and fewer affordable options have made home ownership more challenging.
This is particularly evident in MMR and Pune, where prices rose sharply post-COVID due to high investor activity and limited land availability. Although the Reserve Bank of India has paused interest rate hikes, home loan rates remain high, continuing to impact affordability.
Outlook: A Stabilising Market, Not a Sinking One
Despite the short-term decline, the long-term outlook for the housing market remains positive. Demand persists in key cities, and developers continue to invest in land and high-end projects. Experts suggest the market is undergoing a correction rather than entering a downturn.
“Supported by sectoral performance and improving consumption trends, macroeconomic indicators point to India’s resilience in a turbulent global environment,” the PropTiger report noted.
As buyers wait for improved affordability and financial clarity, and developers adjust their strategies, the coming quarters will be crucial in determining whether this is a pause before the next growth cycle in India’s housing journey.
Frequently Asked Questions
What caused the 14% decline in home sales in India's top residential markets?
The decline is primarily due to affordability issues, rising home prices, and higher interest rates, which have strained the purchasing power of the middle class. Geopolitical tensions and macroeconomic uncertainty have also contributed to the decline.
Which cities saw the sharpest decline in home sales?
The Mumbai Metropolitan Region (MMR) and Pune reported the sharpest declines, with MMR falling 32% year-on-year and Pune declining 27%.
How are developers responding to the decline in home sales?
Developers have slowed the pace of new project launches, with new supply declining 17% year-on-year and 10% quarter-on-quarter. They are also focusing more on the premium segment, which remains relatively insulated from affordability challenges.
Which cities recorded strong growth in home sales despite the overall decline?
Chennai, Bengaluru, and Kolkata recorded strong year-on-year growth in home sales, with increases of 33%, 16%, and 19%, respectively.
What is the long-term outlook for India's housing market?
Despite the short-term decline, the long-term outlook remains positive. Demand persists in key cities, and developers continue to invest in land and high-end projects. The market is expected to undergo a correction rather than a downturn.
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