Whalesbook
The Bifurcated Market
India's residential property sector in 2025 presented a tale of two distinct markets. While overall residential sales across the top eight cities remained largely stable, hovering around 348,207 units with a marginal 1% year-on-year decline, the underlying trend revealed a pronounced bifurcation. The demand for homes priced above ₹1 crore experienced a robust 14% surge, now constituting half of all annual residential transactions. This segment's dominance is a stark contrast to the affordable housing sector—properties priced under ₹50 lakh—which grappled with a significant 17% contraction in demand and a sharp 28% drop in new launches. The mid-range segment (₹50 lakh to ₹1 crore) also saw a notable 8% decline in sales, exacerbating the polarization. This structural shift underscores a market recalibration driven by evolving buyer preferences and developer strategies, with capital allocation increasingly favouring high-margin, premium developments.
The Premiumisation Engine
This dramatic shift towards premiumisation is reshaping the Indian housing landscape. Homes priced above ₹1 crore accounted for approximately 50% of total sales in 2025, a significant leap from just 16% in early 2018. JLL data further indicates that premium homes captured 62% of market share in the first half of 2025, an increase from 51% the previous year, with demand particularly strong in the ₹3-5 crore bracket. This surge is propelled by rising incomes, aspirational lifestyles, and NRIs returning with global expectations. Consequently, weighted average property prices across major cities climbed, with NCR leading at a 19% year-on-year increase, followed by Hyderabad (13%) and Bengaluru (12%). Macroeconomic tailwinds, including eased liquidity from RBI rate cuts and stable inflation, provided a supportive backdrop for the overall market, though the benefits were disproportionately captured by the high-end segment. Government policy initiatives, such as the National Real Estate Policy 2025 introducing single-window clearances and RERA's ongoing push for transparency, aim to streamline the sector, yet the fundamental affordability challenge persists for a large segment of the population.
The Bear Case: Affordability Crisis and Sector Strain
The aggressive premiumisation of the Indian real estate market presents a growing affordability crisis. As developers pivot away from lower-ticket projects due to compressed margins, new launches in the affordable segment have plummeted by 28% [cite: Source A/News1]. This strategic retreat has led to a severe supply crunch in sub-₹50 lakh housing, even as demand contracted by 17%. The market share of homes priced below ₹50 lakh has shrunk dramatically from nearly 63% in 2022 to just 21% in 2025. This leaves a significant portion of the population, particularly aspiring middle-class buyers in urban centers, priced out of the market. On the broader market front, the Nifty Realty index has been one of the worst-performing sectors in 2025, declining over 26% from its peak and entering bear market territory. Major developers have reported substantial stock price drops, indicating sector-wide pressures despite the premium segment's growth. Regulatory implementation of RERA remains uneven across states, with criticisms of enforcement and delays persisting, leaving many buyers trapped in stalled projects.
Future Outlook
Analysts project sustained demand in the premium and luxury segments, driven by robust wealth creation and continued lifestyle aspirations. The focus for developers is expected to remain on high-margin projects, potentially leading to further supply discipline in premium categories and continued price appreciation. While overall market volumes might stabilize or see modest growth, the trend of premiumisation is likely to persist. However, the widening gap between high-end aspirations and mass-market affordability will remain a critical concern, potentially impacting social equity and long-term sustainable growth across the sector.