India’s housing market is undergoing a structural transformation, with premium homes rapidly gaining dominance while affordable housing demand weakens, according to the latest report by Knight Frank India titled India Real Estate: Office and Residential Market H2 2025.
The report shows that total residential sales in 2025 remained largely stable at 3,48,247 units, reflecting only a 1% year-on-year decline, indicating underlying market resilience despite segment-wise divergence.
However, the most striking trend is the sharp contraction in the affordable segment. Homes priced below ₹50 lakh saw sales fall 17% YoY, while new launches in this category plunged 28%, signaling developers’ growing reluctance to invest in low-margin projects.
Premiumisation of India’s Housing Market
Homes priced above ₹1 crore have now become the dominant segment, accounting for 50% of total annual sales. Sales in this category rose 14% YoY, highlighting strong demand among affluent buyers and investors.
Even the mid-range segment priced between ₹50 lakh and ₹1 crore witnessed an 8% YoY decline, suggesting that demand is increasingly concentrating in higher price brackets.
According to Shishir Baijal, Chairman and Managing Director of Knight Frank India:
“The overall residential market continues to exhibit underlying resilience… However, the affordable housing segment faces pronounced pressures, with demand declining 17% YoY and supply contracting more sharply by 28% YoY.”
He added that developers are reallocating capital toward premium housing, which is now shaping the current housing cycle.
City-wise Sales Performance (2025)
| City | Units Sold | YoY Change |
|---|---|---|
| Mumbai | 97,188 | +1% |
| Bengaluru | 55,373 | 0% |
| Pune | 50,921 | −3% |
| Delhi‑NCR | 52,452 | −9% |
| Ahmedabad | 38,403 | +4% |
| Kolkata | 18,752 | +2% |
| Hyderabad | 18,262 | +12% |
| Chennai | 16,896 | −3% |
The data shows regional divergence. Hyderabad led growth with a 12% increase, while Delhi-NCR experienced the steepest drop, falling 9% overall and 25% in affordable housing sales.
Supply Crunch in Affordable Housing
The slowdown is not just demand-driven. Supply is shrinking faster than sales:
- New launches under ₹50 lakh: −28% YoY
- Launches in ₹50 lakh–₹1 crore: −9% YoY
- Unsold inventory under ₹50 lakh: −7% YoY
This suggests that developers are intentionally scaling back supply in lower price segments rather than facing excess unsold stock.
Inventory & Absorption Trends
Premium segments are witnessing faster absorption despite higher prices. For example:
- ₹2–5 crore homes: QTS (quarters to sell) 3.9
- ₹50 lakh–₹1 crore homes: QTS 5.3
- Ultra-luxury ₹20+ crore homes: QTS 15.8
Lower QTS means faster sales, indicating stronger buyer appetite in higher segments.
Structural Shift, Not Temporary Dip
Analysts interpret these trends as a structural realignment rather than a cyclical fluctuation. Rising income inequality, wealth concentration, and investor demand for luxury properties are tilting the market toward premiumisation.
At the same time, affordability challenges, land costs, and regulatory expenses are pushing developers away from budget housing projects.
Conclusion
India’s housing sector is not slowing — it is reshifting. Overall sales remain stable, but the composition of demand is changing rapidly. Premium homes are becoming the backbone of residential markets, while affordable housing is shrinking in both supply and demand.
Unless policy incentives or cost-reduction measures are introduced, experts believe this premium-heavy cycle may continue for several years
Also Read: Luxury homes sales in Mumbai have risen 50%
