Residential real estate sector saw sales falling in FY26 due to high base, higher prices and decline in launches due to approval related issues. The West Asia conflict also hit the sales in last quarter of FY26.
Area sold across the top seven cities in the country is expected to decline by 0–3% to 625–645 million square feet in FY2026 mainly due to a fall in project launches and a high base effect, according to rating firm ICRA.
Launches across top seven cities declined by 3% YoY during 9M FY2026 due to delayed approvals and are estimated to contract by 1–4% to 645–665 million sq ft in FY2026, said Anupama Reddy, vice president & co-group Head, ICRA.
Crisil has put the drop in sales growth (in terms of sales value) higher at 5 to 7% in FY26. The rating firm attributed the fall to stagnancy in demand due to elevated capital values as well as delayed launches caused by approval related issues.
Price rise major factor for decline in sales
Price rise has been a major factor for decline in sales. Following a 15% growth in average selling prices (ASP) in FY2025, it is expected to further rise by 6-8% in FY2026 driven by a higher proportion of the premium segment in the overall sales mix. ASPs are projected to rise moderately by 4-7% during FY2027 on a high base, Reddy of ICRA siad.
The march quarter of the FY 2026 saw moderate rise of single digits across the top 7 cities unlike earlier when prices rose in double digits. “This trend will continue in FY 2027 as well because of the slowing sales. The single digit price rise will primarily be due to the rise on construction costs,” said Anuj Puri , chairman of Anarock Propery Consultants said.
The looming uncertainty due to the war and surging oil and construction prices clearly have impacted housing sales with buyers getting more cautious, particularly in the March period, said Puri. He said the decline is also because the prospective Middle Eastern homebuyers who invest significantly in Indian real estate may have hit the pause button under the war cloud.
Outlook: A marginal growth of 0–3% in FY2027 is expected in area sold, supported by slightly higher demand in mid and luxury categories amid an expected rise in new launches, said Reddy at ICRA , adding ” However, prolonged conflict in West Asia could directly impact economic activity and create downside risks to the full year estimates,” she said .
ICRA projects the launches to recover with 4-7% growth in FY2027, supported by spillover launches, comfortable unsold inventory levels, smoothening of the e-khata process in Bengaluru, and easing regulatory approvals following the Supreme Court ruling in MMR and Pune. With launches expected to outpace sales, the years-to-sell (YTS) is likely to rise to 1.4 years as of March 2026 and around 1.4 – 1.6 years as of March 2027, while remaining comfortable.
What do researchers at Crisil say?
Crisil expected that in FY 2027, with growth flattening for both average selling price and demand, sales (value) growth is expected to be slightly lower at 4-6%. Growth in average selling price is expected to dip to 3-5% in FY27 following a period of high growth—CAGR of 11% from FY 2022 to Fyl 2025 and a steady 7-9% increase estimated for FY 2026—which has established a high base, Crisil said.
Said Gautam Shahi, Director, Crisil Ratings, “The sustained increase in housing prices is expected to lead to a flattish demand growth of 0-2% in FY 2027. This is despite the expectation that approval-related challenges will ease out in fiscal 2027 for Pune and the Mumbai Metropolitan Region.
However developers are optimistic about sales. “We have publicly stated that our guidance for FY27 is Rs 4500 to 5000 Crore. This will represent a healthy growth over the prior year inline with our overall target of reaching 10000 crore by FY30” said Amit Kumar Sinha , managing director and CEO at Mahindra Lifespace Developers.
On pricing , Sinha said it has been on a healthy trajectory across the major cities partly driven by mix shift towards premium/luxury. “We expect the trend to continue, however geo-political tensions could impact the pricing temporarily,” he said .
“We remain optimistic about FY27, with residential sales expected to witness mid-single-digit growth, particularly across emerging pockets within the MMR region. We expect demand to be driven by a clear shift towards premium housing; not just in pricing, but in lifestyle upgrades, amenities, and overall quality of living, ” Navin Makhija , managing director at The Wadhwa Group
He said additionally, they are seeing increased participation from NRIs and global investors, particularly from the Middle East and the US, partly driven by evolving geopolitical dynamics that are reinforcing India’s appeal as a stable, long-term investment destination.
Despite lower sales growth, the industry’s operating performance remains healthy, underpinned by steady collections. The collections have closely aligned with construction progress in the past, driven by timely project executions, which has led to strong cashflow generation, Crisil said.
The substantial cash flow generation has, in turn, helped developers reduce their reliance on external debt for funding project construction. In FY 27, cash flow from operations (CFO) is poised to grow 15-17%, supported by collections growth of 22-24%, it said
On the downhill
Area sold is expected to decline by 0–3% to 625–645 million square feet in FY2026
Launches across top seven cities declined by 3% YoY during 9M FY2026
Launches are estimated to contract by 1–4% to 645–665 million sq ft in FY2026
Average selling prices are expected to further rise by 6-8% in FY2026
Sales (value) growth is expected to be slightly lower at 4-6% in FY27