India's housing market: Fewer sales, higher prices in 2025-26

India's housing market in 2025-26 has shifted from expansion to recalibration, marked by a 14% year-on-year decline in sales across the top seven cities by the end of 2025. Despite fewer units sold, the total value of residential transactions increased by 6% to over ₹6 lakh crore, indicating a move towards higher-priced properties.

The most significant impact is seen in the affordable segment, with sales of homes under ₹1 crore plunging by approximately 30%. Conversely, premium housing, particularly properties exceeding ₹1 crore and increasingly ₹2.5 crore, has gained traction in both launches and absorption.

This market transformation is driven by widening affordability issues, with property prices rising about 8% annually in 2025. Economic uncertainty, including layoffs in the IT sector, also contributes to a confidence gap, particularly affecting middle-class and first-time buyers.

While interest rates have seen modest reductions, home loan EMIs remain elevated relative to incomes. This financing equation, coupled with evolving buyer expectations for larger homes and better amenities, causes many prospective buyers to adopt a wait-and-watch approach.

Tier-II cities mirror this trend, experiencing a 10% drop in sales volume while transaction values remained steady. The shrinking supply of homes below ₹1 crore is a key factor driving higher ticket sizes and slower absorption in these markets as well.

Analysts anticipate stabilization rather than a sharp correction, contingent on deeper rate cuts and developers recalibrating launches. The market is transitioning to a value-led cycle, with premium buyers remaining active, but the broad middle-class base pausing their purchasing decisions.