India Luxury Housing Boom: Affordable Homes Shrink

India’s residential real estate market is undergoing a significant transformation, with luxury housing rapidly expanding its footprint. The share of homes priced below Rs 1.5 crore has sharply declined in new launches across top seven cities, according to CareEdge Ratings.

Shifting Market Dynamics

Between Q1 2022 and Q1 2026, the market observed a notable repositioning of segments:

• Homes priced below Rs 1.5 crore saw their share fall from 85% to just 47%.
• The mid-premium segment (Rs 1.5-4 crore) expanded from 14% to 44%.
• Luxury homes above Rs 4 crore experienced a nine-fold increase, growing from 1% to 9% of new launches.

This dramatic shift is primarily driven by developers increasingly focusing on mid-premium and luxury housing. Evolving customer preferences and escalating costs associated with land acquisition, construction, and compliance have made affordable housing projects less viable.

Drivers of Demand and Developer Health

Strong demand from affluent domestic buyers and Non-Resident Indians (NRIs) seeking larger homes with premium amenities has further encouraged developers. These market forces prompt a greater allocation of new supply to the luxury and ultra-luxury segments.

Leading residential developers have also seen an improvement in their financial health. The debt-to-collections ratio reached a record low of 0.68 times in FY26, a significant reduction from 1.80 times in FY20.

• This deleveraging stems from healthy collections.
• It is also supported by successful fundraising efforts.
• Enhanced financial discipline among developers contributes to this trend.

While robust balance sheets empower large developers to navigate market uncertainties, smaller and mid-sized developers may face increased vulnerability due to their potentially weaker financial positions.

Regional Sales Performance

Housing demand across major Indian cities presents a mixed picture in Q1 2026:

• Chennai recorded the strongest sales growth at 9%.
• Bengaluru followed with a 5% increase.
• Hyderabad saw sales growth of 1%.
• Conversely, Pune and Delhi-NCR experienced an 11% year-on-year decline.
• The Mumbai Metropolitan Region (MMR) also registered a 7% drop in sales.

These declines are largely attributed to persistent affordability pressures, sustained price appreciation, and cautious buyer sentiment in certain regions. Southern markets, alongside Kolkata and Ahmedabad, demonstrated more resilience, bolstered by consistent end-user demand, employment-linked housing needs, new project activity, and comparatively affordable pricing.