India's Residential Real Estate Sales Dip 4% in Q1 2026, Office Leasing Reaches New High

India’s residential real estate market showed signs of moderation in the first quarter of calendar year 2026 (Q1 2026), with sales declining 4 per cent year-on-year (Y-o-Y), while office leasing during the same period touched a quarterly high, according to Knight Frank India.

Residential sales during the quarter stood at 84,827 units, down from 88,361 units in Q1 2025. In contrast, office leasing rose 6 per cent Y-o-Y to 29.9 million square feet (msf).

What is driving the moderation in housing sales?

According to Knight Frank, large-volume markets such as Mumbai (down 7 per cent), the National Capital Region (down 11 per cent), and Pune (down 11 per cent) recorded Y-o-Y declines in sales, even as underlying demand drivers remained intact. The current softening in sales momentum may indicate an early phase of recalibration following a prolonged period of strong growth.

Shishir Baijal, international partner, chairman and managing director, Knight Frank India, said the moderation partly reflects natural consolidation after strong growth. However, he added that rising prices alongside softening volumes signal mounting pressure on affordability and absorption. He also noted that a volatile geopolitical environment and sustained correction in equity markets have contributed to subdued residential demand.

Which housing segments are seeing demand shifts?

Market activity remained skewed toward higher-priced homes, while volumes declined in segments below Rs 1 crore. Units priced above Rs 1 crore grew 11 per cent Y-o-Y in Q1 2026, whereas the sub-Rs 50 lakh and Rs 50 lakh–1 crore segments fell 23 per cent and 12 per cent, respectively. Growth was led by the Rs 1–2 crore segment, which rose 10 per cent Y-o-Y and accounted for 29 per cent of total sales.

Prices continued to rise despite a moderation in sales and supply in Q1 2026, with all markets recording Y-o-Y increases. The highest appreciation was seen in NCR, led by Ghaziabad (up 13 per cent) and Greater Noida (up 11 per cent).

What do inventory and supply trends indicate?

Across the top eight cities, quarters-to-sell (QTS) edged up from 5.9 quarters in Q1 2025 to 6 quarters in Q1 2026. Unsold inventory also rose 3 per cent Y-o-Y to 519,844 units. While launches declined 2 per cent Y-o-Y in Q1 2026, they continued to outpace sales for the 14th consecutive quarter.

Why is office leasing outperforming housing?

Meanwhile, office space demand continued to outstrip completions as developers remained focused on residential projects. Around 14 msf of office space was delivered across eight major cities in Q1 2026, a sharp 154 per cent Y-o-Y increase, but still less than half the space absorbed during the quarter.

The persistent supply-demand gap since 2021 has steadily tightened market conditions. Vacancy levels compressed from 17.2 per cent in 2021 to 14.4 per cent in Q1 2025 and further to 13.9 per cent in Q1 2026.

Consequently, rental growth remained positive in Q1 2026, ranging between 2 per cent and 15 per cent Y-o-Y across cities. NCR and Kolkata led gains at 15 per cent each, while Hyderabad and Chennai recorded increases of 8 per cent Y-o-Y. Rent levels in Mumbai and Bengaluru rose more moderately, by 6 per cent and 7 per cent Y-o-Y, respectively.

Bengaluru remained the largest office leasing market, recording 9.2 msf of leasing activity. Global capability centres (GCCs) continued to dominate as the largest end-user segment, leasing 14.4 msf and accounting for 48 per cent of total leasing in Q1 2026.

Baijal added that while near-term uncertainties may influence decision-making timelines, India’s underlying stability and structural growth drivers are expected to sustain leasing momentum and support a positive medium-term outlook for the office market.