Residential Real Estate Set for Steady Growth in FY25-26; Premium Segment to Lead Launches
India's residential real estate market is poised for steady growth, with sales volume projected to increase by 5-7% and average prices appreciating by 4-6% over the next two fiscal years, according to Crisil Ratings.
Real EstateResidential MarketCrisil RatingsProperty PricesLuxury SegmentReal Estate NewsJul 01, 2025
Crisil’s analysis, based on a sample of 75 developers representing nearly 35% of national residential sales, indicates that although supply has outpaced demand in recent years and is expected to continue doing so, the overall credit profile of real estate firms remains strong. This is largely due to solid cash collections and significantly deleveraged balance sheets.
Demand remained flat in FY24 due to high property prices and delayed launches in cities impacted by state elections and regulatory changes. However, this is expected to recover in FY25 and FY26 as affordability improves with easing interest rates and a more stable pricing environment. “The premium and luxury segments in the top seven cities have witnessed a significant surge, with their share of launches increasing from 9% in 2020 to 37% in 2024,” said Gautam Shahi, director at Crisil Ratings. These categories could constitute as much as 40% of total launches by 2026.
The trend is being fueled by rising incomes and urbanization, as buyers increasingly seek larger and more upscale homes. Meanwhile, launches in the affordable and mid-income segments are expected to decline sharply, accounting for just 10-12% and 19-20% of launches, respectively, in calendar years 2025 and 2026. This is a significant drop from their 30% and 40% shares in 2020. “Rising land and input costs have made these categories less financially viable for developers,” Shahi explained.
Inventory levels, which stood at 2.7-2.9 years over the past two fiscals, may edge up to 2.9-3.1 years due to continued oversupply. However, Crisil noted that developers have managed to deleverage significantly by adopting asset-light models such as joint ventures and by raising equity through qualified institutional placements (QIPs). QIP proceeds as a share of total debt rose to 24% in FY24, up from 13-16% in the three preceding fiscals. “The significant increase in QIP proceeds and the continuing improvement in cash flow from operations (CFO) has contributed to strong credit metrics,” said Pranav Shandil, associate director at Crisil Ratings. “As a result, the debt-to-CFO ratio is expected to improve to 1.1-1.3 times over this fiscal and the next, compared to 1.2-1.5 times in the past two years. For context, this ratio was as high as 5.6 times in FY20.
However, Crisil warned that developers’ ability to keep leverage low and manage inventory prudently will remain critical in sustaining this financial stability.
Frequently Asked Questions
What is the projected growth in sales volume for the residential real estate market in FY25-26?
The sales volume for the residential real estate market is projected to increase by 5-7% in FY25-26.
How has the premium and luxury segment of the residential market performed in recent years?
The premium and luxury segments have seen a significant surge, with their share of launches increasing from 9% in 2020 to 37% in 2024.
What factors are driving the growth in the premium and luxury segments?
Rising incomes and urbanization are driving the growth in the premium and luxury segments as buyers seek larger and more upscale homes.
How have affordable and mid-income segments been affected?
Launches in the affordable and mid-income segments are expected to decline sharply, accounting for just 10-12% and 19-20% of launches, respectively, in 2025 and 2026.
What measures have developers taken to manage their financial stability?
Developers have managed to deleverage significantly by adopting asset-light models such as joint ventures and by raising equity through qualified institutional placements (QIPs).
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