India’s residential real estate sector has been in a strong run over the last 2-3 years, but the high base is slowly expected to catch up on growth rates from 2025. Analysts now see more demand coming up in the mid-market segment compared to the luxury housing boom this year.
Post-COVID, as people looked to shift to their own houses or upgrade to bigger homes, home sales rose at a fast clip. According to HSBC Global Research analysts Puneet Gulati and Akshay Malhotra, residential real estate pre-sales volumes and value rose at 18 per cent and 31 per cent compounded annual growth rates, respectively.
The HSBC analysts are still expecting growth in 2025 but state that the high base will start impacting the pace of growth. Further, growth will start pivoting towards mid-income housing.
“The past four years have been dominated by upgrade demand, serving developers well to achieve better pricing. We think another notable preference for high-rises in the Indian economy has increased the addressable market for developers. This will stand in good stead from a demand perspective, but developers will need to pivot towards more mid-income housing as luxury housing hits a high base,” said Gulati and Malhotra.
The strong sales growth has weighed on shares of listed real estate developers. The BSE Realty Index is up nearly 47 per cent over the past 12 months, compared with the 17 per cent gains in BSE Sensex.
“If the approval cycle remains weak, companies may need to cut growth guidance for FY26 pre-sales to the high-single to low-double digits. From recent discussions, we feel investors are still focussed on pre-sales and, hence, any slowness could adversely impact stock performance,” the HSBC analysts said.
A separate report by consultants JLL earlier this month noted that sales hit a new nine-month (January-September) peak in 2024, with close to 230,000 homes across the top seven cities worth Rs 3.80 lakh crore being sold during that period. JLL has projected that at the end of 2024, over 300,000 homes worth Rs 5.10 lakh crore across 485 million square feet are expected to be sold.
JLL noted that developers had continued to acquire strategic land parcels this past year across the metro cities, and therefore, the housing supply in the top seven cities is expected to be “robust,” with demand also expected to stay “strong.”
