India’s housing market is not slowing down. It is changing shape.
That is the central takeaway from Knight Frank India’s flagship report, India Real Estate: Office and Residential Market H2 2025. On the surface, the numbers suggest resilience. A total of 3,48,207 homes were sold in 2025, a sign that buyer appetite remains intact despite global uncertainties and domestic cost pressures. Sales of homes priced above Rs. 10 million rose 14 percent year-on-year.
But look closer and a clear pattern emerges. The market is tilting decisively toward higher-value homes, while affordable housing is losing ground.
A Market That Looks Strong on the Surface
The shift is sharp. Homes priced above Rs. 10 million now account for half of all annual sales. Meanwhile, demand for homes under Rs. 5 million declined 17 percent year-on-year. Supply fell even faster. New launches in the sub-Rs. 5 million category dropped 28 percent. In the Rs. 5–10 million segment, launches declined 9 percent, while sales slipped 8 percent.
This is not a mild correction. It is a structural realignment.
Affordable Housing Under Pressure
Affordable housing, once positioned as the engine of inclusive growth in Indian real estate, is under visible strain. Developers are stepping back from lower-ticket projects. The data suggests caution, not confidence, in that segment.
Shishir Baijal, International Partner, Chairman and Managing Director at Knight Frank India, described the divergence clearly. The overall residential market remains supported by a stable macroeconomic backdrop and recent repo rate cuts. Yet affordable housing is facing pronounced pressure. Demand has fallen 17 percent year-on-year, while supply has contracted even more sharply at 28 percent.
When supply drops faster than demand, something deeper is happening. Developers are making a conscious capital allocation choice. Premium housing offers stronger margins, faster absorption among higher-income buyers, and lower regulatory and compliance friction per unit of revenue.
Affordable housing, by contrast, operates on thin margins. Construction costs have risen over the past few years, land prices remain elevated in urban centres, and financing conditions have not always been easy for lower-income buyers. In such an environment, developers are prioritising segments where pricing power is stronger.
The result is a shrinking footprint for affordable homes in India’s urban housing landscape.
The Premiumisation Wave
This premiumisation trend is visible across major markets, but it stands out in certain cities. Delhi-NCR, for instance, recorded a 9 percent decline in overall sales. Within that, the affordable category saw a 25 percent year-on-year drop. The region, once a significant contributor to mid-income and lower-income housing supply, is now seeing developers recalibrate their portfolios.
Interestingly, unsold inventory in the sub-Rs. 5 million segment contracted by 7 percent. On the surface, that could look like improving absorption. But in reality, it reflects the lack of fresh supply entering the market. When fewer new projects are launched, inventory naturally shrinks. It is less a story of booming demand and more a case of developers choosing not to replenish stock.
In contrast, premium housing continues to expand its dominance. Higher-value homes are benefiting from a cohort of buyers whose purchasing power has strengthened post-pandemic. Dual-income households, business owners, and senior professionals are upgrading. There is also a preference shift at play. Buyers are seeking larger homes, better amenities, and projects in established micro-markets. Aspirational demand is rising, and developers are responding.
What This Means for India’s Housing Cycle
The broader economic backdrop has also helped. Interest rates have softened, and macroeconomic stability has supported consumer confidence. But those benefits are not evenly distributed across income groups. Higher-income buyers are better positioned to leverage lower borrowing costs. For first-time buyers in the affordable segment, affordability remains tightly linked to income growth and job security.
What emerges is a housing cycle defined less by volume expansion and more by value concentration.
India is not selling fewer homes. It is selling more expensive homes.
This raises important long-term questions. Affordable housing plays a central role in urban inclusion and workforce mobility. If supply continues to contract in this segment, the pressure on rental markets could intensify. Urban sprawl could increase as buyers move farther from city centres in search of lower prices. Infrastructure planning and policy interventions may need to adapt accordingly.
For now, the numbers tell a clear story. The residential market in 2025 is resilient, but not evenly balanced. Premium homes are shaping the narrative. Affordable housing is struggling for momentum.
Markets evolve. Capital flows toward perceived safety and higher returns. The current housing cycle reflects that instinct.
Whether this premium-heavy phase becomes the new normal or gives way to a more balanced structure will depend on policy support, income growth, and developer strategy in the coming years. For the moment, India’s housing story is less about expansion at the base and more about acceleration at the top.
