Real Estate Sector Enters Normal Growth Phase: Liquidity and Sales Management Crucial
India’s real estate sector is moving from a sharp upcycle into a more normalized phase of growth, while the overall outlook remains structurally neutral, according to India Ratings and Research (Ind-Ra). In this environment, sustaining balance-sheet strength will depend on prudent liquidity management, disciplined execution, and the ability to preserve sales momentum amid moderating demand and rising cost pressures, even as select residential segments and commercial asset classes continue to show resilience.
“The real estate sector is experiencing demand consolidation, with growth rates likely to moderate to less than 10% to 12% from the past five years’ over 30% compounded annual growth in value terms for tier-1 players. The ongoing Middle East conflict could exacerbate operating margins and elongate executional challenges, which has been a pain point over the past two years,” said Mahaveer Shankarlal, Director, Corporate Ratings, Ind-Ra.
According to him, a key silver lining remains the resilience of the mass market segment with ticket sizes ranging from Rs 1 crore to Rs 3 crore and limited unsold branded inventory. Maintaining sales velocity and ramping up execution will be critical to ensuring liquidity and balance sheet strength.
The ratings agency expects booking growth to moderate in 2026-27 from elevated levels, after a robust five-year upcycle. The sector is entering a phase of demand consolidation, with growth for tier-1 developers likely to normalize to low double-digit levels, reflecting both a higher base and more measured buyer decision-making. However, the sector’s structural relevance remains intact, supported by urbanization, infrastructure development, rising household incomes, and favorable demographic dynamics.
Limited unsold branded inventory, particularly ready stock accounting for below 5%–10% across the top eight cities, continues to balance the market. India Ratings expects price appreciation to normalize to a measured 3%-4% in 2026-27, supported by ongoing project launches, but tempered by moderate demand. It expects developers will continue to face margin pressure from rising input costs, execution challenges, and regulatory delays, making operating discipline critical.
Maintaining sales velocity, ramping up execution, and tightly managing cash flows will be key determinants of balance-sheet resilience as the sector navigates this phase of recalibration. The ratings agency is of the view that despite the overall demand softening, the mass-market and upper-mid segments will continue to exhibit greater resilience. Aspirational buyers will prefer larger, better-quality homes by established developers, providing stability amid broader demand moderation. This segmental differentiation underscores the importance of portfolio positioning, brand strength, and delivery track record in sustaining momentum.
For commercial real estate, information technology sector growth remains a concern. However, the sector will continue to exhibit steady growth, underpinned by healthy net leasing activity, driven by BFSI, manufacturing, global capability centres (GCCs), and the expanding flexible workspace segment. Supply additions are broadly aligned with demand, keeping oversupply risks contained. With vacancies expected to remain in the 12%–18% range, rentals are likely to grow 4-6% on-year in 2026-27, particularly for compliant, certified Grade-A assets where rental outperformance is increasingly evident.
India Ratings expects heightened geopolitical uncertainty may exert near-term pressure through elevated construction costs and elongated execution timelines. This could lead to deferred launches and a temporary wait-and-watch approach from residential buyers, while large commercial leasing decisions may be paced more gradually. However, these factors are expected to delay rather than structurally impair demand, with Tier-1 cities, branded developers, near-completion projects, and GCC-led office demand continuing to anchor medium-term stability.
