India’s Residential Realty in FY27: Understanding a Subdued Yet Stable Outlook
An explainer on the forecasted performance of India’s housing market, the forces behind it, who is affected, and what the future may hold.
The Indian residential real estate sector, which includes the market for homes and apartments bought by individuals and families, has been one of the most closely watched segments of the economy in recent years. Following a period of strong expansion after the COVID-19 pandemic, growth in the housing market is now expected to enter a more subdued phase in the financial year 2026–27 (FY27). This shift is rooted in changing affordability dynamics, evolving demand patterns, and broader economic trends that are reshaping how people buy homes and how developers plan their projects.
This explainer breaks down the key dimensions of this outlook — what’s happening, why it matters, who it affects, and how the sector may evolve in the months ahead.
What Is Happening in India’s Residential Real Estate?
India’s housing market experienced robust growth from FY23 through FY25, driven by strong demand, rising incomes, and a recovery in construction activity following pandemic-related disruptions. In contrast, the latest assessment by India Ratings and Research projects that growth in FY27 will be muted compared with past years. Sales growth — measured in terms of the number of homes sold and overall housing turnover — is expected to be moderate, at around 5 %–7 % year-on-year (YoY).
Slower Growth after a High Plateau
The projection of subdued growth comes after several years of accelerated expansion. The sector’s “high base” — meaning strong performance in recent years — makes it mathematically more difficult to sustain the same pace of growth. Compounding this is the fact that rising property prices have put upward pressure on home costs, dampening affordability for many buyers. These combined effects are leading analysts to expect slower momentum in the next financial year.
Developers Remain Optimistic
Interestingly, major property developers — including leaders from established firms — appear largely unfazed by the forecasted moderation. Many industry executives believe that the premium and luxury segments of the market will continue to perform well, even as mid-market demand softens. They point to resilient buyer interest and future growth prospects, especially in select cities and segments, as reasons for continued confidence.
Why This Outlook Exists: Root Causes and Contributing Factors
The expected slowdown in residential real estate growth reflects a combination of market forces rather than a single cause. Below are the primary drivers behind this trend:
1. Affordability Constraints
Rising property prices have outpaced income growth in many urban centres, making it harder for middle-income buyers to afford homes. In several top metropolitan areas, prices have climbed significantly in recent years, pushing some potential buyers to the sidelines. This situation affects the mid-market segment — homes that are neither ultra-luxury nor low-income but aimed at average homebuyers — more deeply than premium properties.
2. Demand Shifts in Major Cities
Demand in cities with heavy reliance on information technology (IT) jobs — such as Bengaluru, Pune, and Hyderabad — is also evolving. The employment landscape in these regions is experiencing consolidation as automation and artificial intelligence (AI) technologies reshape workforce needs. Slower expansion in these job markets can reduce the number of new homebuyers entering these cities, especially among young professionals seeking to upgrade their housing.
3. Post-Pandemic Market Dynamics
The post-pandemic housing boom was supported by pent-up demand, migration patterns, and lower interest rates. However, as these tailwinds fade and the market normalises, growth rates naturally adjust towards longer-term averages. In other words, a period of rapid rebound has given way to a more “disciplined” phase of growth where market fundamentals play a larger role. This pattern has been noted in several industry analyses.
4. Divergence Between Price and Volume Trends
Recent real estate research shows that while home prices continue to rise, the number of homes sold has either plateaued or declined in certain cities. This divergence suggests that the market is transitioning toward value growth (higher prices) without equivalent expansion in unit sales — a sign of recalibration rather than collapse.
Historical Context: From Pandemic Slump to Growth and Adjustment
To understand the current outlook, it helps to trace how India’s residential real estate has evolved over the past several years:
Pandemic-Era Contraction and Recovery
The global COVID-19 pandemic disrupted economic activity across sectors, including housing. Sales volumes fell sharply in 2020 as lockdowns and economic uncertainty made buyers cautious. But following the initial shock, the market rebounded strongly, driven by pent-up demand and a desire for larger or better-located homes as remote work and lifestyle changes took hold.
Post-Pandemic Expansion (FY23–FY25)
Between FY23 and FY25, the residential real estate sector experienced robust growth. Rising incomes, easier access to credit, and demographic trends — including a growing middle class — pushed up both the number of home sales and property values, especially in premium segments. Many cities saw double-digit price growth during this period.
Signs of Stabilisation in FY26
As the market entered FY26, sales growth started to moderate. While prices remained high, the number of units sold in some of the major Indian cities showed signs of softening. Analysts and rating agencies interpreted this as a stabilisation rather than a downturn — a shift from rapid expansion to more steady, sustainable growth.
Who Is Affected — And How
The changing outlook in the housing market has ripple effects across several groups:
Homebuyers
For potential buyers, especially first-time and mid-income purchasers, higher prices and tighter affordability play a central role. While low interest rates and tax benefits may offer some relief, once property prices outgrow incomes, fewer buyers can afford homes without stretching their budgets.
Developers
Real estate developers are navigating a more complex environment. Premium and luxury housing segments continue to attract buyers with stronger purchasing power. However, builders focusing on mid-market and affordable segments may face slower sales, forcing them to adjust pricing strategies, diversify product offerings, or innovate in financing options.
Investors
Residential real estate remains a significant investment class. Higher prices in premium segments attract investment demand, both domestically and from non-resident Indians. But in the face of slower overall growth, investors may become more selective, favouring projects with strong fundamentals, clear delivery timelines, and favourable locations.
Broader Economy
Real estate is a key pillar of India’s economy, contributing an estimated significant share of GDP and impacting sectors from construction to financial services. A stable and calibrated market supports economic health by balancing supply and demand without creating asset bubbles or undue risk. However, prolonged affordability pressures could reduce construction activity and suppress related industries.
Understanding the Data: Growth, Prices, and Demand
The table below outlines broad trends that have emerged in recent years and the expected pattern for FY27:
| Aspect | Pre-Pandemic / Early 2020s | Post-Pandemic (FY23–FY25) | Forecast for FY27 |
|---|---|---|---|
| Sales Volume | Moderate | Rapid growth | Moderate growth (~5–7 %) |
| Property Prices | Stable | Strong increase | Prices remain high but affordability softens |
| Buyer Demand | Middle + Premium | All segments | More premium, mid-market challenged |
| Developer Outlook | Cautious | Confident | Mixed — premium stable, mid-market pressured |
| Market Sentiment | Uncertain | Optimistic | Neutral to cautiously optimistic |
Real-World Impacts: Communities and Lifestyles
The way the housing market evolves affects everyday people in tangible ways:
Affordability and Living Standards
In some urban centres, the gap between incomes and property prices can make home ownership seem out of reach for many working families. Long-term mortgages may stretch household budgets, influencing decisions about savings, child education, healthcare, and lifestyle choices.
Urban Growth and Local Economies
Cities with strong job markets and infrastructure — such as transport links and quality civic amenities — continue to attract buyers. This concentration of demand can raise property values further, benefitting homeowners but making it harder for newcomers to enter the market.
Community Development
Where demand is robust, developers invest in planned townships, modern amenities, and integrated services, which can improve quality of life. Conversely, softening demand in some segments may slow new construction in less-connected areas.
What Could Happen Next — Outlook and Scenarios
The future trajectory of India’s residential real estate will depend on multiple interacting factors:
Potential Supportive Factors
• Policy and regulatory measures — If government initiatives improve affordability or offer incentives for mid-market housing, demand could be stabilised.
• Interest rate trends — Lower mortgage rates enhance buyers’ purchasing power and can boost sales volumes.
• Infrastructure development — Better connectivity and civic services in emerging urban corridors can attract new buyers.
Ongoing Challenges
• Affordability gap — Unless incomes grow faster than home prices, mid-mass demand may remain constrained.
• Economic uncertainty — Broader macroeconomic headwinds could affect employment and financing conditions.
• Segmental imbalances — Premium segments may outperform while affordable housing lags, creating uneven growth.
Scenarios for FY27
• Measured Growth – The most likely path is a continuation of moderate growth as projected, with value appreciation balancing slower unit sales.
• Upside with Policy Support – With targeted interventions to boost affordable housing and mortgage accessibility, the market could expand more broadly.
• Downside Risks – If affordability pressures deepen or macroeconomic pressures tighten, sales could slow further and prolong market consolidation.
Conclusion: A Sector in Transition
India’s residential real estate market is moving from a period of rapid recovery and expansion into a more nuanced phase of measured, value-led growth. While overall sales growth in FY27 is expected to be modest, the continued performance of premium segments and evolving demand patterns point to a sector that is stabilising rather than contracting sharply.
Understanding these trends — from affordability dynamics to employment shifts and broader economic conditions — is crucial for policymakers, developers, investors, and homebuyers alike as they navigate the opportunities and challenges ahead.
Article compiled from data and insights drawn from market analyses and reporting by India Ratings and Research and other sector sources.
Reviewed by Aparna Decors
on
February 26, 2026
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