India's housing sector has entered the mid-cycle phase, according to Nuvama Research, marking a significant shift from the earlier growth-driven phase. In this new phase, the focus has moved towards factors such as product mix, demand breadth, and interest rate trends, which are expected to play a more substantial role in determining sector and stock performance than pre-sales growth.
In August 2025, housing sales by value experienced a notable 23% year-on-year increase and a 3% month-on-month rise, driven by a sharp pick-up in volumes and realizations. This marks the third consecutive month of year-on-year growth in sales volumes, indicating a rebound in demand after a prolonged slump.
Despite the surge in sales, supply remained subdued. Launches by value were flat on a year-on-year basis and down 3% sequentially in August, reflecting cautious developer activity despite sustained demand. Unsold inventory improved to 17 months in August, compared to 18 months both a year ago and in July.
While the housing market shows signs of recovery, affordability remains a significant concern. Rising home prices, driven by demand from affluent buyers, are pricing out first-time buyers and deepening inequality. Home prices are expected to rise at a faster pace than earlier projected, with average home prices in major Indian cities set to increase by 6.3% in 2025 and 7.0% in 2026, after a 4.0% gain in 2024. This outlook is higher than previous forecasts, indicating a tightening market for entry-level buyers.
Nuvama Research suggests that developers should focus on optimizing product mix and targeting high-demand segments to navigate the current market dynamics. Developers with strong brand equity and a diversified portfolio are better positioned to capitalize on the evolving market trends. Additionally, interest rate trends will continue to influence buyer affordability and demand, making it crucial for developers to stay attuned to monetary policy changes.
The Indian housing market's transition into the mid-cycle phase presents both opportunities and challenges. While demand is rebounding, affordability concerns persist, and developers must adapt their strategies to focus on product mix and respond to interest rate trends. Stakeholders in the real estate sector should remain agile and data-driven to navigate this evolving landscape effectively.
