After three years of robust post-pandemic growth, India’s real estate market is entering a phase of moderation in fiscal 2025. While residential property sales are expected to slow, the commercial real estate segment continues to show steady momentum, highlighting a shift from rapid expansion to a more balanced and sustainable growth cycle.
Residential Market Sees Mild Slowdown in FY25
Following strong performance between FY22 and FY24, residential demand across India’s top seven cities—Bengaluru, Chennai, Delhi-NCR, Hyderabad, Kolkata, Mumbai Metropolitan Region (MMR), and Pune—is expected to decline by 2–4% in FY25.
According to Aniket Dani, Director – Ratings & Research, CRISIL Ratings, this slowdown is largely the result of a high base effect and affordability pressures rather than any fundamental weakness in demand.
“After a strong growth phase over the past three fiscals, residential sales are witnessing a natural moderation in FY25. Elevated capital values and a high base have weighed on demand in the near term, even as end-user interest remains intact,” said Aniket Dani, Director – Ratings & Research, CRISIL Ratings.
Why Are Homebuyers Turning Cautious?
The moderation in demand is being driven by multiple factors:
- High base effect due to record sales in previous years
- Sharp capital value appreciation, making homes more expensive
- Higher stamp duty and registration charges in certain cities
- Affordability constraints, particularly in entry-level segments
Despite this, enquiries and site visits continue, indicating buyers are postponing decisions rather than exiting the market.
Premiumisation Continues to Shape New Launches
Even as overall sales volumes soften, the premiumisation trend remains strong.
Developers continue to focus on:
- Larger apartments with higher carpet areas
- Lifestyle amenities and better specifications
- Mid-income and premium housing segments
This shift suggests that financially stable buyers are still active, while price-sensitive demand is under pressure.
Home Prices to Rise, But at a Slower Pace
Capital values are expected to rise at a moderate pace of 5–7% in FY25, compared with the 13–14% annual appreciation seen in the previous two fiscals.
“While prices are likely to continue rising, the pace of appreciation will normalise as developers focus on sustaining sales velocity and maintaining affordability,” Dani added.
This moderation is expected to make the market healthier over the medium term.
Residential Demand Recovery Likely by FY27
Looking ahead, the residential market outlook improves from FY27 onwards.
Key demand drivers include:
- Rising household incomes
- Expected reduction in home loan interest rates
- Infrastructure-led connectivity improvements
- Continued end-user-driven demand
These factors are expected to revive volumes while maintaining price stability.
Commercial Real Estate Continues Its Upward Trajectory
In contrast to housing, commercial real estate is projected to grow steadily in FY25.
- Demand expected to rise by 5–7%
- New supply projected to increase by 9–11%
Growth is being driven by:
- Expansion of Global Capability Centres (GCCs)
- Strong leasing by IT/ITeS and BFSI sectors
- Rising adoption of flexible and managed workspaces
India’s role as a global services hub continues to support office market fundamentals.
Commercial Growth May Moderate Next Fiscal
While FY25 remains strong, commercial real estate growth is expected to slow in the next fiscal, largely due to the high base of the past 4–5 years.
However, this is seen as a cyclical pause, not a structural slowdown.
The Big Picture: Stability Over Speculation
Despite near-term moderation in housing and expected normalisation in office demand, the long-term outlook for India’s real estate sector remains positive.
Urbanisation, infrastructure spending, formalisation of housing, and institutional participation continue to provide a strong foundation for sustainable growth.
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