The deceleration reflects a phase of price normalisation after two years of strong appreciation, even as demand remained resilient in select end-user-driven markets such as Bengaluru and Hyderabad.

Bengaluru, Hyderabad Buck the Trend

Among the eight major cities, Bengaluru and Hyderabad stood out with relatively stronger price momentum in 2025.

• Bengaluru recorded 13% annual price growth, up from 12% in 2024, driven by sustained end-user demand and strong absorption. During the year, prices rose 21% between Q1 and Q4 2025, pushing average values to ₹9,500 per sq. ft. in Q4, making it India’s second-most expensive housing market, overtaking Delhi-NCR.
• Hyderabad saw prices rise 8% in 2025, compared to 3% growth in 2024, supported by steady demand and balanced supply additions.

Price Growth Cools Across Other Major Markets

In contrast, price appreciation slowed considerably across the remaining six cities:

• Ahmedabad: 8% growth (down from 10% in 2024)
• Mumbai MMR: 4% growth (sharp moderation from 18% in 2024)
• Pune: 1% growth (down from 16% in 2024)
• Delhi-NCR: 6% growth (after an exceptional 49% rise in 2024)
• Kolkata: 6% growth (down from 10%)
• Chennai: Prices remained flat after a 16% rise in 2024

At an aggregate level, average housing prices across the top eight cities increased from ₹7,451 per sq. ft. in 2024 to ₹7,874 per sq. ft. in 2025.

Market Shows Consolidation, Not Weakness

According to the report, housing prices continued to firm through 2025, rising an average 8% between Q1 and Q4, indicating stability rather than overheating.

Commenting on the trend, Onkar Shetye, Executive Director at Aurum PropTech, said Mumbai MMR reflected price consolidation in its premium segments, while Pune and Ahmedabad remained broadly stable. Delhi-NCR and Kolkata saw measured growth amid selective demand, while Bengaluru and Hyderabad benefited from strong end-user-driven absorption.

He added that resilient pricing despite moderating sales volumes reflects a disciplined, supply-calibrated market, with developers protecting price integrity and managing inventory prudently heading into 2026.

Inventory Levels Remain Comfortable

The report noted that inventory overhang stayed within comfortable limits, indicating that supply did not materially outpace demand. Unsold inventory growth was more visible in higher ticket-size segments, where decision cycles are longer and liquidity is lower.

According to Shetye, the combination of stable quarterly price increments, controlled supply additions, and calibrated launches helped keep inventory levels well managed through the year.

Sales and Supply Decline in 2025

Despite price stability, housing transactions slowed during the year:

• Residential sales fell 12% YoY to 3,86,365 units in 2025, the lowest annual sales since 2022
• Q4 2025 sales declined 10% YoY to 95,049 units, the weakest quarterly performance since Q2 2023

On the supply side:

• New launches dropped 6% YoY to 3,61,096 units in 2025, the lowest since 2021
• Q4 2025 supply rose marginally by 4% YoY to 92,007 units

This combination of softer sales and moderated supply underscores a market transitioning from rapid growth to sustainable equilibrium.

Outlook for 2026

The PropTiger–Aurum PropTech report suggests that India’s housing market is entering 2026 on a stable footing, supported by disciplined developers, controlled inventory, and end-user demand in key markets. While price acceleration has cooled, the absence of distress signals points to a structurally healthier residential market.

Also Read: Property Prices Surge Significantly Along Yamuna Expressway

The post Housing Price Growth in Top 8 Cities Slows Sharply to 6% in 2025 appeared first on Square Feat India.

APAC Capital Flows Accelerate as Investors Seek Growth

The report highlights a decisive shift in global capital allocation towards the APAC region. APAC-focused capital raising has jumped over 130% since 2024, now accounting for 11% of global real estate fundraising in the first three quarters of 2025. Investors are increasingly targeting markets with strong economic growth and diversification opportunities.

While established destinations like Japan, Australia, and Singapore remain highly preferred, India has emerged as a key growth market for real estate investment within APAC. Expanding middle-class consumption, digital infrastructure development, and a transparent regulatory framework are positioning the region as an attractive long-term investment hub.

India at the Centre of APAC Investment Strategy

The report underscores India’s rising appeal for large-scale capital deployment across core and alternative real estate assets. Investors are particularly interested in land and development-led opportunities, alongside institutional-quality stock in office, residential, industrial and logistics, and data centre segments.

Institutional investments in India totalled USD 4.3 billion during the first nine months of 2025, driven by steady quarterly momentum. With expectations of strong closures in Q4, annual investment volumes for 2025 are projected at USD 5–7 billion, supported by balanced participation from domestic and foreign investors.

Leadership Commentary

Badal Yagnik, CEO & MD, Colliers India, said:
“Investments in India’s real estate sector have demonstrated remarkable resilience. We foresee annual investments of USD 5-7 billion in 2025 and 2026, driven by robust domestic growth, rising urbanization and expanding infrastructure. Both domestic and offshore capital are expected to accelerate, reinforcing India’s position as a resilient, high-potential market.”

Vimal Nadar, National Director & Head of Research, Colliers India, added:
“Office and residential will continue to dominate investments, while industrial & logistics and alternative assets such as data centres will gain traction. Cross-border capital will remain essential as India strengthens its presence among APAC’s preferred destinations.”

Key Sectors to Drive Investments in 2026

Office & Residential

These segments are projected to contribute nearly 60% of India’s investment activity in 2026, supported by sustained occupier demand and a strong development pipeline.

Industrial & Logistics

Investor focus in APAC is led by the I&L sector, driven by e-commerce expansion. Demand for big-box warehousing, last-mile logistics, and cold-storage facilities continues to rise, particularly in India, Japan, and Australia.

Data Centres

Data centre assets are emerging as a high-growth opportunity in Singapore, Australia, and India, supported by hyperscale demand and digital infrastructure expansion.

Retail & Hospitality

Retail assets are regaining investor confidence as supply stabilizes. Hospitality and student housing are expected to attract capital as tourism rebounds and educational migration rises.

India Strengthens Position as Cross-Border Capital Magnet

The survey finds that 64% of APAC investors expect economic improvement in 2026, and nearly 60% are optimistic about liquidity and rental growth. The growing participation of family offices and high-net-worth investors is expected to intensify competition for high-performing assets.

Summarizing market sentiment, Sam Harvey-Jones, COO, Asia Pacific, Colliers, said:
“Investors are shifting decisively toward stability and opportunity as markets regain footing. Improving fundamentals and normalizing pricing expectations are fuelling optimism for 2026.”

Conclusion

With strong economic fundamentals, deepening institutional-grade supply, and expanding participation from foreign and domestic investors, India is positioned to play a central role in driving APAC real estate capital flows through 2026. A steady rise in demand across office, residential, I&L, and data centre assets is expected to keep momentum firm in the coming year.

Also Read: India Leads APAC Real Estate Investments with 88% Growth in H2 2024

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The company reported pre-sales of ₹1,322 crore in Q2 FY26, up 4% year-on-year, with average price realisation rising 7% to ₹8,814 per sq. ft. Customer collections for the quarter grew 8% year-on-year to ₹1,047 crore.

During the first half of FY26, Puravankara added over 6.36 million sq. ft. of potential developable area, translating into an estimated Gross Development Value (GDV) of ₹9,100 crore, through marquee acquisitions in high-demand micro-markets.

Strategic Portfolio Expansion Across Key Markets

Puravankara continued to deepen its presence in Mumbai and Bengaluru through strategic acquisitions and redevelopment projects in H1 FY26, including:

• KIADB Hardware Park, North Bengaluru:
  Partnered with KVN Property Holdings LLP for a 24.59-acre parcel with 3.48 million sq. ft. developable area and GDV potential of ₹3,300 crore.
• Chembur, Mumbai:
  Selected as preferred developer for redevelopment of eight residential societies spread over 4 acres, unlocking 1.2 million sq. ft. of development potential with GDV of ₹2,100 crore.
• Malabar Hill, Mumbai:
  Through its subsidiary, secured a prestigious redevelopment project with GDV potential of ₹2,700 crore, offering 0.7 million sq. ft. of premium residential development on 1.43 acres.
• Balegere, East Bengaluru:
  Entered a joint development for 5.5 acres, with GDV of over ₹1,000 crore.

These acquisitions underline Puravankara’s strategy of expanding in premium, high-demand urban pockets, particularly in Mumbai’s redevelopment space, which offers significant long-term value creation potential.

Sales and Collections: Steady Momentum

• Q2 FY26 Pre-sales: ₹1,322 crore vs ₹1,270 crore in Q2 FY25 (↑4%)
• H1 FY26 Pre-sales: ₹2,445 crore vs ₹2,349 crore in H1 FY25 (↑4%)
• Sales Volumes: 1.50 msft in Q2 FY26; 2.75 msft in H1 FY26
• Average Realisation: ₹8,814/sft in Q2 FY26 (↑7% YoY); ₹8,891/sft in H1 FY26 (↑8% YoY)
• Customer Collections: ₹1,047 crore in Q2 FY26 (↑8% YoY); ₹1,904 crore in H1 FY26 (↑1% YoY)

Market Context: Real Estate Tailwinds

India’s macroeconomic picture continues to support the real estate sector. Real GDP grew 7.8% YoY in Q1 FY26, driven by services, construction, and consumption. The RBI raised its FY26 growth projection to 6.8%, indicating strong domestic demand and rural recovery.

Residential demand across top metros grew ~1% YoY in Q3 CY25, led by the ₹1–2 crore price segment. Prices rose 5–17% across markets, with NCR, Bengaluru, and Chennai leading the surge. Against this backdrop, Puravankara’s performance and land acquisitions position it strongly to leverage ongoing real estate tailwinds.

Management Commentary

Ashish Puravankara, Managing Director, said:

“In Q2 FY26, we sustained growth momentum driven entirely by sustenance sales, achieving pre-sales of ₹1,322 crores and collections of ₹1,047 crores. This performance underscores the continued trust of our customers and the strength of our brand across markets. Our focus remains on disciplined execution and strategic expansion in high-demand micro-markets.”

Key Takeaway

With steady sales, rising price realisations, and aggressive but strategic land acquisitions, Puravankara is positioning itself as a major player in Mumbai and Bengaluru’s evolving residential landscape, particularly in the redevelopment segment, which remains a key growth engine for urban real estate.

Also Read: Puravankara Secures Malabar Hill Redevelopment Project Worth ₹2,700 Crore

The post Puravankara Expands Portfolio with ₹9,100 Cr GDV in H1 FY26; Mumbai, Bengaluru Acquisitions Strengthen Growth Momentum appeared first on Square Feat India.

Total institutional investments in Indian real estate stood at USD 3.0 billion in H1 2025

Q2 2025 Registers a 29% Uptick Over Q1 2025

After a relatively slow Q1, Q2 2025 saw a significant rise in investment flows, touching USD 1.7 billion, up 29% sequentially.

“Domestic capital has emerged as a key driver in India’s real estate investments… Their growing dominance has helped cushion the impact of global uncertainties.”
— Badal Yagnik, CEO, Colliers India

Domestic vs Foreign Investments (USD Million)

“Despite a drop in foreign capital, total investments remain above the half-yearly average of USD 2.6 billion since 2021.”
— Colliers Report

Asset Class-Wise Investment Trends

“The residential segment continued its strong run… The retail sector is also witnessing a steady revival.”
— Vimal Nadar, Head of Research, Colliers India

* Alternate assets include: data centers, life sciences, student housing, schools, senior housing, and holiday homes.

City-wise Investment Performance

“Mumbai and Bengaluru together accounted for 39% of total inflows, led by residential and office deals. Retail emerged strong in Kolkata due to large transactions.”

Key Highlights at a Glance

• USD 3.0 Bn institutional investments in H1 2025 (↓15% YoY)
• Domestic investors: USD 1.4 Bn, ↑53% YoY
• Foreign investors: USD 1.6 Bn, ↓39% YoY
• Top segments: Residential (27%), Office (24%), Mixed-use (21%)
• Top cities: Mumbai (22%), Bengaluru (17%), Kolkata (13%)

Also Read: Indian Real Estate: Riding Higher in 2025

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India’s residential real estate sector is expected to sustain steady growth over this fiscal and the next, as sales and demand stabilize following three years of strong post-pandemic recovery, according to an analysis by CRISIL Ratings.

The report, covering 75 major real estate companies that account for ~35% of national residential sales, projects a compound annual growth rate (CAGR) in sales volumes of 5–7%, with average prices rising 4–6%. This translates to a steady 10–12% growth in value terms.

Demand Revival Supported by Lower Rates and Premium Housing
Last fiscal, demand remained flat, weighed down by higher capital values and delays in launches due to elections and regulatory changes in some states. However, the current and next fiscals are expected to see demand rebound on the back of:

• Improving affordability as interest rates soften
• Sustained appetite for premium and luxury homes
• Normalization of project launches across key micro-markets

“The premium and luxury segments in the top seven cities have seen their share of launches jump from 9% in 2020 to 37% in 2024,” said Gautam Shahi, Director, CRISIL Ratings.
“This trend is expected to continue, with premiumisation driving 38–40% of launches in 2025 and 2026.”

Premiumisation Redefining New Supply
In contrast to the rising prominence of premium housing, the affordable and mid-segments are expected to decline further, largely due to rising land and input costs that have rendered these categories less attractive to developers.

Launch Share by Segment (%):

Supply Still Outpacing Demand
Developers had already ramped up launches over the past three years, leading to supply outpacing demand. As this trend continues, inventory levels are expected to increase slightly:

• From 2.7–2.9 years in the past two fiscals
• To 2.9–3.1 years over the current and next fiscal

Deleveraged Balance Sheets and Strong Collections Underpin Stability
Despite the supply overhang, developers’ credit profiles have strengthened significantly due to:

• Robust collections from strong sales
• Timely project execution
• Adoption of asset-light development models (joint ventures, joint developments)
• Substantial equity inflows, especially through qualified institutional placements (QIPs)

In fact, the QIP proceeds as a percentage of outstanding debt rose from 13–16% in the preceding three fiscals to 24% last fiscal, reflecting growing investor confidence.

Debt Metrics at a Healthy Level

“The continuing improvement in cash flow from operations and rising equity inflows have strengthened credit metrics,” said Pranav Shandil, Associate Director, CRISIL Ratings.
“The debt-to-CFO ratio is projected to improve to 1.1–1.3 times this fiscal and the next, down from 1.2–1.5 times previously and significantly below the ~5.6 times seen in FY20.”

Key Credit Metrics Snapshot:

Outlook: Prudent Leverage, Controlled Inventory Key to Stability
While the outlook remains positive, CRISIL notes that developers’ ability to maintain moderate leverage and control inventory will remain critical for sustaining credit strength.

The report underscores that premiumisation, improved affordability, and healthy cash flows will drive steady growth—albeit at more moderate rates compared to the surge seen in the immediate post-pandemic years.

Also Read: ICRA and CRISIL enhance Commercial Paper limits of Godrej Properties Limited to INR 2000 crore

The post Residential Sales to Maintain Steady 10–12% Growth Path: CRISIL Ratings appeared first on Square Feat India.

Key Insights from the Report

• Decline in Deal Numbers: The total number of PE deals dropped from 30 in 9M FY24 to 24 in 9M FY25.
• Increase in Average Deal Size: The average deal size grew to $117.3 million, driven by large-scale transactions like the Reliance-ADIA/KKR deal worth $1.54 billion.
• Sectoral Dominance: The industrial and logistics sector captured 62% of total investments, boosted by the Reliance-ADIA/KKR and Blackstone-LOGOS deals.

Breakdown of Asset Classes

The industrial and logistics sector emerged as the leader, followed by the residential and office sectors.

Top PE Deals

The top 10 PE deals accounted for 93% of total transactions. Key deals included:

1. Reliance-ADIA/KKR deal (Logistics, $1.54 billion)
2. GIC-Xander deal (Commercial, Hyderabad, $258 million)
3. Blackstone-LOGOS deal (Logistics, $204 million)

Funding Trends

• Hybrid Deals Lead: Hybrid transactions dominated, accounting for 55% of investments, compared to 24% for debt and 21% for equity.
• Domestic vs. Foreign Funding: Foreign investors retained a majority share at 82%, while domestic funding increased to 18%.

Sectoral Highlights

• Residential Sector: PE investments in residential projects rose to 15% in 9M FY25 from 12% in 9M FY24, reflecting strong housing demand.
• Commercial Sector: This segment faced challenges due to geopolitical concerns and high interest rates, though operational performance remains robust.
• Industrial & Logistics: Continued demand from e-commerce, manufacturing, and 3PL supported growth in this sector, with a shift toward Grade-A properties.

Shobhit Agarwal, CEO of ANAROCK Capital, noted, “The Indian real estate sector continues to attract significant PE investments, especially in logistics and warehousing. While challenges persist in commercial real estate, the anticipated reduction in interest rates in 2025 could drive renewed interest across asset classes.”

With increased demand for quality assets and evolving investor strategies, the PE landscape in Indian real estate is poised for further growth in the coming quarters.

Also Read: ahmedabad real estate market

The post PE Investments in Indian Real Estate Surge to $2.82 Billion in 9M FY25 appeared first on Square Feat India.

Focus on Infrastructure and Economic Growth
Despite declining real estate activity in the second half of 2024, the sector anticipates the government will prioritize robust infrastructure development, a long-term driver for real estate growth. The budget is also expected to include measures to stabilize the economy and enhance GDP growth, with a focus on supporting SMEs, MSMEs, job creation, and skilling initiatives.

Affordable Housing in Need of Revival
Affordable housing, a once-thriving segment, has struggled post-pandemic, with its sales share in the top seven cities dropping to 18% in 2024 from over 38% in 2019, according to ANAROCK Group data. The supply of affordable homes has also declined significantly.

To address these challenges, industry experts are calling for targeted government intervention, including:

• Reintroducing the Credit-Linked Subsidy Scheme (CLSS): This scheme, which expired in 2022, provided financial incentives for first-time buyers of affordable homes. Its revival could stimulate demand in this segment.
• Restoring the 100% Tax Holiday for Developers: Developers previously benefited from tax exemptions under Section 80-IBA of the Finance Act, 2016, which helped increase affordable housing supply. Reinstating this provision could boost developer interest in such projects.
• Revising Affordable Housing Criteria: Current definitions of affordable housing, particularly the price cap of INR 45 lakh, are considered outdated in high-cost markets like Mumbai. Experts suggest raising the price cap to INR 85 lakh in Mumbai and INR 60-65 lakh in other metros to reflect market conditions.

The Road Ahead
ANAROCK Group Chairman Anuj Puri noted that centrally controlled land managed by agencies such as Indian Railways and the Port Trusts could be released for affordable housing projects, addressing land scarcity issues.

The slowdown in 2024 saw housing sales in the top seven cities decline by 4% to approximately 4.46 lakh units, while new launches dropped by 7% to around 4.13 lakh units. However, stakeholders believe that with the right incentives, 2025 could mark a turnaround for the residential real estate market.

The Union Budget 2025-26 holds the potential to reinvigorate the sector, fostering growth and ensuring housing remains affordable for all.

Also Read: Nirmala Sitharaman to present the union budget

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Bengaluru, the Silicon Valley of India, is synonymous with technological expertise and economic growth. Its skyline, replete with towering skyscrapers and vast residential tracts, speaks volumes of its booming real estate sector driven by India’s thriving IT and corporate sectors. The past few years have seen Global Capability Centres (GCCs) emerge as a dominant factor in Bengaluru’s real estate dynamics.

GCCs are the Offshore Development Centres of global enterprises. These centres, driven by government policies, have highly impacted the residential and commercial real estate sectors of Bengaluru, besides raising the city’s global status. Bengaluru was the first choice for setting up GCCs in India because of its skilled manpower, innovative infrastructure, and cosmopolitan culture.

Favourable Government Policies Driving GCC Expansion

The Karnataka Government’s GCC Policy, which aims to set up 500 new GCCs by 2029, has been significantly driving the state’s urban growth. Besides bringing multinationals from all around the globe to Karnataka, the GCC policies of the state have driven significant infrastructure investments. This includes the enhancement of the Bangalore Metro and the Peripheral Ring Road, as well as the upcoming knowledge, wellbeing, and innovation city – KWIN city. These projects are aimed at connecting and improving infrastructure, thus making Bengaluru a desirable hub for residential and commercial investment.

Additionally, the policy is expected to create 3.5 lakh jobs, which will bring countless professionals to the city.

Also, the government’s efforts towards sustainable urban growth have promoted developers to embrace green building practices and eco-friendly designs. These initiatives align with the sustainability goals supported by multinational corporations operating GCCs, thus creating an appealing link between policy and real estate development.

Thriving Commercial Realty Driving Demand for Residential Spaces

The growth of GCCs has propelled Bengaluru’s commercial real estate sector. Industry reports show that between 2020 and 2023, Bengaluru accounted for 26.4 million square feet of GCC leasing, or 37% of total GCC leasing, thus making Bengaluru the largest contributor in this particular segment. Also, demand for commercial space has gone up, along with rental values as multinational companies are increasingly setting up large facilities. Occupancy percentages in business districts are also on the rise. A report by CREDAI and CRE Matrix says that the supply of high-end office space in six major cities has exceeded 700 million square feet, with Bengaluru accounting for the largest share at 28%.

Such high demand for commercial properties is creating ripples in the residential market as well. Let’s see how:

The GCC influx in Bengaluru has driven considerable economic growth by generating high-paying jobs and attracting affluent expatriates and skilled professionals. These employees, mainly mid-level and senior professionals, look for upscale living spaces to stay nearby, which in turn has increased the demand for luxurious apartments, gated communities, and smart homes designed with modern amenities in Bengaluru. The growing popularity of smart homes with installed IoT-enabled devices, energy-efficient systems, and advanced security solutions resonates with the tech-savvy lifestyle of GCC employees.

Residential Real Estate Trends

Evolving employee preferences have transformed the residential real estate scene in Bengaluru. Developers are now focused on developing high-end projects in North Bengaluru and districts like Whitefield, Sarjapur Road, and Outer Ring Road, which are conveniently located near major IT and GCC hubs. These areas provide proximity to workplaces besides offering serene and well-structured living environments. Consequently, integrated townships and mixed-use developments, which integrate residential, commercial, and recreational spaces, have gained immense popularity in such regions. For GCC professionals, it means convenience, connectivity, and improved living conditions.

Co-living spaces are equally gaining traction in Bengaluru, particularly among younger professionals and expatriates. Besides being affordable and flexible, these shared accommodations offer a sense of community, thus making them ideal for Bengaluru’s migrant workforce. Furthermore, the hybrid work model is also influencing the residential realty sector. More professionals look for homes that can also serve as productive workspaces. Consequently, developers are designing properties with dedicated office areas, high-speed internet, and ergonomic features to cater to these requirements.

Opportunities in Residential Real Estate Going Forward

GCCs’ influence on Bengaluru’s residential real estate market will increase in the coming years. The city will gain further recognition as a real estate hotspot as it solidifies its standing as a top spot for global capability centres. What’s more, the infrastructure development driven by GCCs has led to rising property prices in significant locations. Thus, developers in Bengaluru are reaping the benefits of the growing housing demand through innovative construction technologies and design principles to cater to the tastes and preferences of GCC employees. Smart city concepts, ranging from integrated digital infrastructure to sustainable practices, are also becoming part and parcel of residential projects. These developments address the requirements of professionals in the GCCs besides positioning Bengaluru as a global city offering premium living experiences. Due to its focus on urban planning, sustainable growth, and policy support, the city is well-positioned to maintain its competitive edge.

Future Prospects: Bengaluru as a Global Hub

With GCCs projected to generate an economic output of $50 billion by 2029, Bengaluru’s real estate market is set to grow exponentially. Property prices in prime GCC locations, such as North Bengaluru, are already seeing significant appreciation, averaging over ₹7,000 per square foot. These trends make the city a magnet for investors and end-users alike. Continued investment in infrastructure, sustainable development, and innovative real estate solutions should make Bengaluru a hub of excellence not only for global businesses but also homeowners.

Also Read: Bengaluru property values

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Looking ahead, 2025 is likely to be a year of consolidation and continued innovation in Indian real estate. Sustained confidence of domestic and international investors is widely anticipated to remain unabated. While residential and office markets can potentially stabilize after consecutive peaks, industrial & warehousing demand can witness heightened traction. The growth of the industrial & warehousing segment will be fueled by rising manufacturing output and a thriving logistics industry. Notably, alternative asset classes such as data centers, co-living and senior housing are likely to witness accelerated growth, reflecting a broader and steady shift in demographics and consumer preferences. Rapid urbanization, key infrastructure project completion and industrial corridor development will create new growth opportunities, particularly in Tier-II & III cities. Furthermore, the integration of technology and sustainability will shape the future of real estate development, reinforcing the sector’s role as a cornerstone of India’s economic growth.

“2025 could be another year, wherein multiple real estate classes ride high on investor and end-user optimism. While residential and office markets can potentially stabilize and continue to grow after consecutive peaks, industrial & warehousing demand can witness heightened traction. Notably, alternative asset classes such as data centers, co-living and senior housing are likely to witness accelerated growth, reflecting a broader and steady shift in demographics and consumer preferences. Additionally, the ongoing democratization of real estate is set to gain further momentum through retail investments in fractional ownership platforms and anticipated REITs & SM-REITs throughout 2025.” says Badal Yagnik, Chief Executive Officer, Colliers India.

OFFICE

2024 round-up: Office demand continues to scale-up

The office market in India has continued its upward trajectory, registering a higher space uptake in successive quarters of 2024. Annual gross leasing across the top six cities already reached 47.0 million sq feet by the third quarter of the ongoing year, reflecting a 23% year-on-year increase. Bengaluru and Hyderabad remained dominant markets, driving almost half of the leasing activity between January and September. At India level, 2024 is likely to see Grade A absorption breach 60 million sq feet for the first time in the office market of the country. Although demand from tech occupiers has relatively stabilized, it will continue to drive one-fourth of the overall leasing. On the other hand, flex space demand is set to surge and can potentially account for one-fifth of the total demand across the top six cities in 2024. Similar to demand, the 37.4 million sq feet of completions during the first three quarters of 2024 were led by Bengaluru and Hyderabad. Overall, new supply is also likely to follow demand and surpass the 50 million sq feet mark in 2024. Vacancy levels at the end of 2024 will remain rangebound. Rentals, meanwhile, are expected to show a 5-10% annual growth across most cities.

2025 outlook: A year of market solidification and growth

India’s office market, driven by shifts in demand characteristics, will solidify in 2025 and build upon its impressive performance in 2024. The need for managed office spaces amidst evolving business requirements, flexible lease terms and cost arbitrage will continue to fuel adoption of ‘Core + flex’ model in commercial office real estate. Strong domestic growth prospects and a positive economic outlook will keep occupier as well as developer confidence intact. Overall supply is likely to follow the demand trajectory. This is likely to further firm up rentals. Moreover, as demand in Indian commercial office real estate solidifies, notwithstanding unforeseen events, annual space take up to the tune of 60 million sq feet is likely to be the new norm in the next few years.

·       Demand base to broaden further with BFSI and Engg. & Mftg, as front runners: In the upcoming year, engineering & manufacturing and BFSI occupiers are expected to together account for about 35-40% of the total office space demand. On the other hand, space uptake by technology firms will eventually stabilize and drive about 25-30% of the total demand as they continue to embrace hybrid and distributed working models.

·       GCC demand likely to be on an upswing: GCCs are expected to continue to play a pivotal role in driving the demand for Grade A office space in India, accounting for 40-50% of the leasing activity in 2025. Akin to the recent Karnataka GCC policy, focused policies can be put into motion by various state governments. As GCCs continue to scale-up their India offerings, their need for modern, high-quality office spaces will continue to witness traction over the next few years. Smaller cities like Mysuru, Mangaluru, Hubli and Dharwad can complement the GCC activity of established centers such as Bengaluru in the long term.

·       Increasing space rationalization: Going forward, as corporates increasingly implement decentralized work strategies, occupiers are likely to expand their offices in multiple locations with relatively smaller real estate footprints. Average deal size across sectors post-pandemic has rationalized at around 43,000 sq feet in 2023, an 11% dip compared to 2019 levels. At the same time, number of deals rose by 43% during the same period. Across Tier-I cities, we can expect heightened traction in mid-sized deals (50,000-99,999 sq feet). Although average transaction sizes can further rationalize below 40,000 sq feet in 2025, overall volumes in mid-sized deals can increase and contribute close to one-fifth of the Grade-A office space demand. 

·       Rising activity in Tier-II & III Cities: Corporate India is increasingly open towards operating beyond traditional commercial hubs. Cities like Bhubaneswar, Chandigarh, Coimbatore, Indore, Jaipur, Kochi, Thiruvananthapuram etc. are likely to witness a significant influx of businesses, driven by factors such as lower operating costs, equally strong availability of skilled talent and infrastructure upgrades. This shift is likely to result in a significant demand surge across these smaller cities in 2025. Most of the Tier-II & III cities are likely to witness healthy annual growth in Grade A leasing activity. Additionally, taking demand cues, leading commercial developers are likely to increasingly foray into these markets with Grade A developments.

·       Flex spaces growth to continue: As flex spaces continue to transform from niche to mainstream, they are likely to increasingly define the contours of Grade A office spaces in India. Reimagination of workplace, changing perceptions and enterprise-level offerings will continue to drive heightened flex adoption in 2025. Share of leasing by flex space operators is likely to be at around 20% of the overall office demand in the upcoming year. Leading flex space operators will continue to expand their portfolios across Tier-II & III cities with an increasing number of players likely to explore asset-heavy models and acquire select commercial properties instead of leasing them from developers.

·       Green certified buildings at the forefront: With a growing emphasis on sustainability, most new office developments in India are incorporating green building practices. LEED and GRIHA-certified buildings are becoming the norm, driven by operational efficacy and compliance pressures. Looking ahead, nearly 80% of the supply pipeline over the next 2-3 years is expected to be green-certified, underscoring the shift towards more sustainable real estate development. About 95-110 million sq feet of existing office stock (≤10 years old) hold the potential for getting E-compliant with minimal capex over the next few years.

RESIDENTIAL

2024 round-up: Strong first half keeps housing sales momentum intact

During 2024, homebuyers’ sentiments have remained positive amidst a compelling domestic economic performance. Supported by stable interest rates, launches and sales across major cities of the country are likely to end on a strong note in 2024. Although there have been recent signs of demand stabilization, a strong first half is likely to ensure another year of remarkable performance by residential real estate. Average housing prices across the top eight cities have already surged 11% annually in 2024. Interestingly, with rising cost pressures, affordability issues can impact the segment more as compared to the office and industrial & warehousing segments.

2025 outlook: Housing demand to remain buoyant despite stabilization

Steady rise in average housing prices can have a stabilizing effect on the residential market in 2025, especially in the affordable housing segment. If enabling conditions prevail, a reduction in benchmark lending rates can add buoyancy to the housing market in 2025. Within residential real estate, demand for luxury and ultra-luxury segments will witness higher growth as compared to affordable and middle-income segments. Developers will continue to recalibrate their strategies and be selective in launching new projects. Amidst sustained housing demand, inventory levels, thus can drop further over the next few quarters. Ready-to-move-in properties and reputed developers with established project execution capabilities will continue to be preferred by homebuyers in 2025.

·       Uptick in luxury housing demand: 2025 is likely to witness healthy traction in luxury and ultra-luxury segments, driven by strong appetite from HNIs and NRIs. A clear preference for premium and best-in-class offerings will increasingly define the contours of the segment. Enquiries and primary sales in plotted developments, villas within gated communities and vacation homes are likely to be strong throughout 2025 and beyond.

·       Tier-II/III cities on an expansionary mode: With rapid urbanization and enabling factors such as infrastructure boost, tourism growth & employment opportunities, the organized residential market is likely to expand beyond the Tier-I cities, creating dispersed growth centers across the country. Real estate activity in the emerging smaller cities is on the rise, evident from established real estate developers foraying into these markets. Infrastructure development will further fast-track real estate growth in Tier-II & III cities including temple towns such as Amritsar, Ayodhya, Dwarka, Puri, Shirdi, Tirupati, Varanasi, etc.

·       Build-to-Rent housing: Untapped opportunity: Within residential real estate, the Build-to-Rent (BTR) segment holds immense potential, driven by rapid urbanization, changing lifestyles, and demand for professionally managed rental housing. Hassle-free contemporary living replete with amenities such as roof-top gardens, gyms, plunge pools etc. can potentially offer better tenant-product-fitment and help in tapping the relatively unexplored segment. BTR properties, often commanding higher rental rates than traditional buildings, can interest niche residential investors and developers over the next few years.

·       Growing demand for senior living to create lucrative opportunities: With India’s aging population projected to increase significantly by 2050, there will be a growing need for senior care and housing. Assuming the long-term potential in the sector, developers are likely to ramp up their activities in the senior living landscape during 2025. The senior living sector, currently valued at USD 2-3 billion, is poised for rapid growth, potentially reaching USD 10-12 billion by 2030. Although the demand-supply gap will continue to persist, market penetration and developer offerings are likely to pick up pace in both independent and assisted living formats over the next few years.

·       Living smart, living green: Demand for smart and sustainable homes will continue to be on the rise, blending advanced technology with sustainable design elements. Residential projects will increasingly witness the usage of sustainable materials and emphasize natural light, ventilation, & green spaces. Lowering carbon footprints is likely to become an important consideration for new-age homeowners, especially millennials. Additionally, installation of solar panels & smart thermostats, and resource-efficient systems including rainwater harvesting & groundwater replenishment systems will increasingly become mainstream across residential segments.

INDUSTRIAL & WAREHOUSING

2024 round-up: Segment remains upbeat with healthy demand and supply dynamics

The first nine months of 2024 saw a 17% annual growth in industrial & warehousing demand, registering 20.2 million sq feet of leasing across the top five cities of the country. Led by healthy leasing activity and improved developer confidence, the period saw new supply of 21.6 million sq feet, a 29% rise YoY. While 3PL players will continue to dominate the overall leasing activity, demand from Engineering and Fast-Moving Consumer Goods (FMCG) segments will gain further prominence, resulting in their combined demand share rising to 30-35% in 2024. Similar to the diversification in the office market, the broadening of occupier base is likely to propel Grade A warehousing space demand to 25-30 million sq feet in 2024. Almost half of the leasing activity is expected to come from Delhi NCR and Chennai.

2025 outlook: Scale-up in manufacturing and uptick in consumption to boost industrial & warehousing demand

The industrial & warehousing segment is set for continued growth in 2025, fueled by healthy domestic demand, enhanced logistics efficiency, and India’s improving capabilities as a global manufacturing hub. Strategic markets like Delhi NCR, Pune, and Chennai are expected to see greenfield developments, driven by healthy leasing activity, the ‘Make in India’ initiative, and growing developer confidence. New Industrial corridors, ramp-up in EV manufacturing facilities, and consolidation of various segments will attract robust domestic and global investments. Rentals are likely to rise in key micro-markets due to high demand and limited availability of Grade A warehouses. Developers will continue to incorporate technology and best-in-class ESG practices to meet changing occupier expectations. Emerging sub-segments such as cold storage, chemical warehousing, and self-storage are expected to increasingly contribute to overall warehousing space uptake across major markets of the country.

·       Manufacturing impetus can translate into large space requirements: Driven by 3PL and Engineering occupiers, large-sized deals (2,00,000 sq ft & above) are likely to account for 40-50% of the overall Grade A industrial & warehousing demand in 2025. Steadfast implementation of existing government programmes and projects such as Make in India, Gati Shakti, Multi-Modal Logistics Parks (MMLP), Performance Linked Incentives (PLI) scheme etc. will continue to provide a fillip to the manufacturing ecosystem in the country over the next few years, resulting in heightened demand for large industrial & warehousing spaces in key micro-markets of Tier-I cities.

·       Increased opportunities in micro-fulfilment centers in Tier-II/III cities: In-city warehouses have already gained prominence in peripheral areas of Tier-I cities, driven by surging E-commerce demand. The demand for Q-commerce and E-commerce has also been notable across Tier-II/III cities, driving demand for micro-warehouses and micro-fulfilment centers. Developers and investors are likely to increasingly scout for opportunities and gain a first-mover advantage in emerging Tier-II/III cities such as Bhopal, Coimbatore, Indore, Nashik, Surat, Visakhapatnam, etc.

·       ‘Plug & Play’ industrial parks to gain traction: Plug & play industrial parks will continue to be a focus area of the government. With envisaged plans of setting up 100 such parks in partnership with private companies, 2025 can witness significant activity from both domestic and international players. Industrial & warehousing demand in the coming years, is likely to grow multi-fold backed by steady occupier demand in ready-to-use facilities. Occupiers using Plug & Play facilities will continue to benefit from focusing on their core competencies and reducing in time-to-market cycle.

·       EVs and other emerging sub-segments likely to spur industrial & warehousing activity: Over the next 5-6 years, around USD 40 billion of investments are envisaged for phased deployment in the EV industry. This can potentially accelerate land acquisition for setting up EV and Original Equipment (OE) manufacturing units including lithium-ion batteries in 2025. As demand for EVs rises, the industrial & warehousing segment is likely to benefit the most. This segment is expected to see a surge in built-to-suit developments tailored for both global and domestic EV manufacturing companies.

·       Heightened interplay of Automation-as-a-Service model and sustainable warehouses: Occupiers are increasingly leveraging technology to scale up their operations and adapt to evolving warehousing requirements. Moreover, Artificial Intelligence (AI), and models such as ‘Automation-as-a-service (AaaS)’ and ‘Digital Twins’ can improve quality control in a holistic manner. Additionally, ESG-compliant and energy-efficient warehouses are likely to be increasingly preferred by both occupiers and developers.

INVESTMENTS

2024 round-up: Indian real estate continues to attract robust institutional inflows

Institutional inflows in Indian real estate continue to remain healthy in 2024, indicating sustained investor confidence. Of the USD 4.7 billion real estate investments during the first nine months of 2024, office and Industrial & warehousing segment together accounted for over 70% share. After witnessing subdued activity in the previous few quarters, investments in office segment surged significantly in the third quarter predominantly driven by foreign investors. Foreign investors continued to dominate overall investments with a 69% share in the total inflows. Buoyed by domestic growth prospects and long-term returns, institutional investments are likely to be around USD 5-6 billion by the end of 2024.

2025 outlook: Indian real estate continues to present compelling investment opportunities

Institutional investment in Indian real estate is expected to remain resilient in 2025 led by healthy economic growth prospects and availability of multiple capital deployment areas. Continuous improvement in ease of doing business backed by a robust regulatory environment will benefit global capital looking at real estate opportunities. Global institutional investors’ confidence will remain upbeat as they continue to make steady investments in both core and non-core assets. Domestic inflows too will not be limited to residential assets and gain further momentum in office and industrial assets. The demand for quality office assets both ready-to-move and developmental will persist, with a focus on sustainability and digitalization. As domestic businesses get familiar with global funding structures, Indian real estate can potentially witness increasing instances of alternate financing avenues such as performance credit, portfolio acquisition, asset restructuring, social impact, distressed, special situation, alternate investment funds (AIFs) and venture capital funds, in the coming years.

·       Investments from APAC countries to surge- Institutional investments in India are likely to see continued growth in 2025, with a notable surge expected from APAC countries such as Singapore, Japan, and Hong Kong. During January-September 2024, APAC investors accounted for about 28% of the total inflows into Indian real estate, up from 22% in 2021. This trend reflects India’s growing preference within developing Asia Pacific markets, driven by its strong economic performance, improved regulatory framework, and robust demand across multiple real estate segments. Further, with the anticipated reversal of the interest rate cycle and widening yield spreads between bonds and real estate, India continues to present an attractive investment proposition for global and regional investors alike.

·       Alternatives & mixed-use assets to gain larger ground: Nascent segments such as data centers, life sciences, holiday homes, senior living, co-living etc. are poised for significant growth in 2025 as investors will continue to seek newer markets and newer avenues to diversify their portfolio while enhancing risk-adjusted returns. While core sectors will continue to dominate the institutional inflows, the share of alternatives is set to rise in 2025. As Indian real estate matures across multiple segments, we are likely to witness an increase in allocation of foreign capital to alternatives. Additionally, developers are likely to focus more on mixed-use assets in leading tech parks and airport development zones which seamlessly combine office, retail, hospitality and industrial & warehousing elements.

·       Retrofitting & redevelopment to increase occupancy and financial viability: Retrofitting of older commercial developments will continue to gain traction in 2025. About 300-350 million sq feet of Grade A office stock (>10 years old) across the top six cities has the potential to get refurbished/retrofitted and become environmentally compliant. In the residential segment too, developers are likely to increasingly focus on redevelopment projects, especially in Mumbai, where the availability of greenfield land parcels is limited to a large extent.

·       Investments in developmental assets to gain prominence through platforms & joint ventures: Institutional investors have traditionally favored completed, pre-leased assets on account of low risk and steady returns. However, with capital requirements already in place for most Grade A operational projects, institutional investors are likely to increasingly partner with local developers for developmental assets across office, residential, and industrial segments. Developmental asset investments throughout 2025 will span across the early stages of a project including land acquisition, and construction.

·       Real estate players to increasingly opt for funding through primary market: Real estate companies in India have so far raised nearly INR 203 billion through Initial Public Offerings (IPOs) in 2024, almost 3X times the amount raised in 2023. Driven by strong demand across residential, commercial, and retail segments, IPOs by real estate developers, Housing Finance Companies (HFCs), and Real Estate Investment Trusts (REITs) with underlying assets such as Grade A offices and malls are likely to see continued momentum in the near-mid-term. Leading flex space operators too have been expanding their portfolios across cities and expediting their IPO plans. Along with newer office REITs, 2025 can potentially be marked by multiple flex operator IPOs.

·       Fractional Ownership: Expanding investment horizons: 2024 witnessed the first SM-REIT listing and a few more are already lined up. SEBI’s recent guidelines pertaining to SM-REITs will encourage Fractional Ownership Platforms (FOPs) to list as SM-REITs, formalizing real estate assets worth over INR 40 billion. SM REITs could see their investor base grow 20 times in the next 4-5 years, democratizing real estate ownership further and establishing fractional ownership as a preferred alternative investment avenue. Additionally, further refinement of SM-REIT guidelines can accentuate retail investor participation beyond office & retail assets and translate into fractional ownership of industrial & warehousing developments and other rent-yielding residential assets in the long term.

Also Read: Healthy investor sentiment will drive capital flow into Indian real estate

The post Indian Real Estate: Riding Higher in 2025 appeared first on Square Feat India.

Affordability Improvements on the Horizon

The affordability outlook for India’s residential market is promising. With the Reserve Bank of India (RBI) signaling a shift towards a neutral stance on monetary policy, a potential rate cut of 50 basis points over the next 12 months is expected to enhance affordability. This, combined with moderate price growth and rising household incomes, will support an improvement in affordability levels across the country’s key real estate markets.

JLL’s HPAI predicts that Mumbai and Pune will approach near-optimal affordability by 2025, meaning that the average household income in these cities will be sufficient to qualify for home loans based on the prevailing property prices. Kolkata, on the other hand, is expected to maintain its lead as the most affordable major city, potentially reaching new affordability peaks.

While Delhi NCR and southern cities like Bengaluru, Hyderabad, and Chennai are also set to see improved affordability, they are likely to remain below their peak affordability levels. However, even these cities will experience better affordability than in previous years.

Record Residential Sales Expected

The anticipated improvements in affordability come at a time of strong growth in India’s residential market. Residential sales are forecast to reach 305,000-310,000 units in 2024, and further growth is expected in 2025, potentially pushing sales to a new peak of 340,000-350,000 units. This surge in sales reflects a growing demand for housing, driven by evolving homeownership dynamics and rising household incomes.

Despite the challenges posed by higher property prices and interest rates in recent years, the market remains resilient, with a sustained bull run driven by strong homebuyer demand. The expected interest rate cuts, alongside moderating price growth and continued income increases, are poised to further fuel the market’s momentum over the next 12-18 months.

Factors Driving Affordability Shifts

JLL’s Chief Economist, Dr. Samantak Das, explains that while the overall economic outlook remains soft, India is still projected to be one of the best-performing large economies globally, supporting steady growth in household incomes. He notes that in 2021, affordability across all major markets reached peak levels. However, rising property prices and persistent interest rates caused affordability to dip in 2022 and 2023. With the anticipated interest rate cuts and moderate price growth, affordability levels are expected to improve to their best since 2022, creating a favorable environment for homebuyers.

The report also highlights the significant growth in real estate prices over the past decade. Hyderabad leads with a 132% price increase since 2011, followed by Bengaluru at 116%, and Delhi NCR at 98%. On the income front, Mumbai has experienced the highest growth, with a 189% increase in household incomes over the same period.

Future Outlook for the Market

Looking ahead, Siva Krishnan, Senior Managing Director at JLL, notes that the combination of strong income growth, potential interest rate reductions, and moderating price growth is expected to improve affordability across India’s key markets. This will ensure continued activity in the residential market, with sustained demand despite ongoing price increases.

JLL’s HPAI will continue to be a vital tool for aligning homebuyers’ affordability with suitable property offerings, ensuring that market demand remains resilient and responsive to economic shifts. The report emphasizes that strategic policy interventions, along with continued improvements in household incomes, will be critical in sustaining demand elasticity in India’s residential real estate market.

Conclusion

India’s residential real estate sector is on track to see improved affordability by 2025, driven by expected interest rate cuts and rising incomes. While cities like Mumbai and Pune are expected to approach optimal affordability, Kolkata is set to maintain its position as the most affordable major market. As residential sales continue to climb, India’s housing market is poised for a resilient and robust future, ensuring strong performance even in the face of rising prices.

Also Read: Oberoi Realty Reports Strong H1FY25 and Q2FY25 Results: Booking Value at ₹2,509.45 Crores; PBT Rises to ₹1,557.50 Crores

The post India’s Residential Market Set for Improved Affordability in 2025, Driven by Interest Rate Cuts appeared first on Square Feat India.