India's Residential Real Estate to Dominate 70% of Market by 2026: Key Drivers and Trends

India’s real estate sector, encompassing residential, commercial, retail, hospitality, and SEZ spaces, is experiencing robust demand. According to the latest report by investment firm Equirus Capital, the residential space alone is expected to account for 70% of the market by 2026, with the addition of 10 million new homes.

There has been a significant momentum in the residential sector, with Q1 CY25 sales reaching 93,280 units. This growth is backed by established developers, a stable economy, and positive buyer sentiment. The residential market is particularly strong in tier-1 cities, where housing sales in H1 2025 amounted to ₹3.6 lakh crore, a 9% increase from the previous year. This rise was driven by a 14% jump in the average ticket size to ₹1.42 crore, reflecting a strong shift toward premium housing.

NCR led the market with a 26% revenue share, boosted by luxury homes above ₹3 crore forming 73% of its sales value. MMR followed with a 23% share, supported by rising ultra-premium demand. Southern markets like Chennai (+23%) and Bengaluru (+4%) also showed value growth, while Pune struggled with declines. Ahmedabad and Kolkata displayed strong momentum, with the latter’s luxury segment doubling its share. This trend highlights homebuyers’ preference for premium, well-located properties.

In the commercial space, the leasing volume hit 20.3 million square feet in Q1 2025, marking a 5% YoY growth. The overall commercial market is projected to grow at a 19.8% CAGR, reaching $253 billion by 2033. This growth is driven by increased leasing activities, particularly by GCCs and flex operators, and easier financing conditions following the RBI’s cumulative 100 bps repo cut.

The retail sector is also benefiting from foreign investments, with FDI in multi-brand retail boosting demand. Leasing in the retail sector hit a 5-year high of 3.1 million square feet in H1 2024, and the top 7 cities added 9 million square feet of retail space in 2025, compared to 8.7 million in 2023.

In the hospitality sector, occupancies are set to rise at a 3.5-4% CAGR, with around 12,000 rooms added in 2023 and an additional 15,000–16,000 rooms expected by 2025. Investor interest has surged post-COVID (2020–2023), with over $400 million invested and plans for $2.3 billion more.

SEZs have also seen significant growth, with the December 2023 rule amendment enabling partial denotification and unlocking 15–18 million square feet for IT/ITeS. This move is expected to further boost the real estate market by attracting more investments and creating additional job opportunities.

In the second quarter, the real estate mood in India brightened, with the Sentiment Index surging to 56 (from 54) and Future Sentiment jumping to 61 (from 56). Developer confidence also surged, with Future Sentiment rising from 53 to 63, driven by easier financing conditions and robust demand in premium housing and steady office leasing. Pricing expectations remained firm, with 94% of respondents foreseeing stable or higher prices.

Overall, the Indian real estate market is poised for significant growth, driven by strong demand in the residential sector, increased commercial leasing, retail investments, and hospitality expansion. The government's policies and investor interest are key factors contributing to this positive outlook.