Luxury housing gains ground in India as affordable homes below Rs 1.5 crore face margin pressures: CareEdge

The shift has been building for years. In the first quarter of 2022, budget homes accounted for 85% of all new launches. That share has been falling steadily since.

Premium and luxury housing gain share 

Homes priced between Rs 1.5 crore and Rs 4 crore now make up 44% of new launches, up from 34% a year ago and just 14% in 2022. The share of homes above Rs 4 crore has also grown, rising from 1% in 2022 to 9% now.

As per the report, rising land acquisition, construction and compliance costs have made affordable housing projects harder to build profitably. At the same time, demand from affluent domestic buyers and non-resident Indians has stayed strong, encouraging developers to build bigger homes with more amenities.

Housing sales soften across major cities 

Housing sales across the top seven cities fell by a low single-digit percentage in the first quarter of 2026 compared to the same period last year. But the drop was not spread evenly.

Premium and luxury housing held up well. Demand in the affordable and middle-income segments, however, softened. Inflation, elevated property prices and affordability concerns are seen as the main reasons, the report noted. 

Housing sales diverge across Indian cities 

According to the report, sales fell by 11% in both Pune and Delhi-NCR in the first quarter of 2026, compared to the same period a year earlier. Mumbai’s metropolitan region saw a 7% decline.

Southern cities told a different story. Chennai recorded a 9% rise in sales, Bengaluru grew 5%, and Hyderabad edged up 1%. Kolkata and Ahmedabad also posted moderate gains of 5% and 2% respectively, the report noted. 

According to the report, buyers in the south are mostly people buying homes to live in, and their demand has stayed steady. Buyers in the north and west are more sensitive to price. Many of them are pulling back after years of steep price rises, as per the report.

West Asia crisis raises real estate costs 

Brent crude prices rose sharply during the West Asia crisis this year, climbing from around $72 a barrel in February to a peak of $117 in April, before easing to $81 by July following a US-Iran agreement.

For real estate, the impact was mostly indirect. Higher crude prices pushed up the cost of cement, steel, transportation and construction logistics. CareEdge estimates that if the crisis drags on, project costs could rise by 2 to 3%, squeezing margins further, particularly for developers in the early stages of construction.

Real estate developers enter stronger financial position 

Despite these pressures, developers are entering this period in healthier financial shape than in previous downturns, the report noted. The debt-to-collections ratio for the top 13 residential developers has fallen from 1.80 times in FY20 to 0.68 times in FY26, its lowest level yet.

Collections from new launches rose to over Rs 90,000 crore in FY26, with bookings crossing Rs 1.5 lakh crore. According to the report, this gives larger, well-capitalised developers a cushion against rising costs and interest rate volatility. Smaller developers with weaker balance sheets are seen as more vulnerable.

Office leasing and real estate investment stay strong 

While residential demand has been mixed, other parts of the sector held firm. Office leasing hit a record 29.9 million square feet in the first quarter of 2026, up 6% from a year earlier. Global Capability Centres accounted for 48% of that demand, up from 44% the previous year. 

Institutional investment in Indian real estate also stayed strong, reaching between $3.5 billion and $4.0 billion in the first half of 2026, the highest since the pandemic. Commercial assets drew the largest share of that capital, the report noted. 

According to the report, residential sales in the top six cities will stay broadly flat in 2026, at around 3,55,000 units. Premium and luxury housing is expected to remain resilient, supported by high-net-worth buyers who are less sensitive to interest rate changes.

India real estate market: The bigger picture 

CareEdge’s report suggested that India’s real estate sector is not facing a broad slowdown. The pressure is concentrated in specific pockets, mainly affordable housing and price-sensitive markets in the north and west, while office leasing, REITs and developer balance sheets remain strong.

The West Asia crisis has acted more as a cost risk than a demand shock, and crude prices have already eased from their April peak. Over the long run, urbanisation, infrastructure spending and GCC expansion will keep driving growth, with larger developers better placed to manage any further cost pressure than smaller, highly leveraged ones, the report said.