Whalesbook
India's Housing Market Faces a Dichotomy in 2025
India's substantial $500 billion real estate market experienced a significant divergence in 2025, marked by a second consecutive annual decline in new home sales volume, yet a notable gain in sales value. This trend underscores persistent affordability challenges for a large segment of buyers, even as the market sees overall value appreciation.
The Core Issue
New home sales volume across seven major cities fell by 14 percent to approximately 5.96 lakh units in 2025. This follows a 4 percent dip in the previous year. The decline is largely attributed to high property prices that continue to erode buyer affordability.
Conversely, the total value of new home sales bookings managed to rise by 6 percent, reaching ₹6 lakh crore. This surge in value is a direct consequence of significant price appreciation seen throughout the post-pandemic housing cycle and a strategic shift by many real estate developers towards the more profitable luxury segment.
Financial Implications
The market is clearly splitting, with premium and luxury residences attracting ultra-rich investors and aspirational buyers. Meanwhile, the entry-level and mid-income housing segments, historically the bedrock of urban property markets, are struggling under sustained pressure. Builders point to high land costs as a primary reason for their difficulty in developing more affordable inventory. The limited supply of homes priced under ₹1 crore is a key factor that dragged down overall sales volumes.
In contrast, India's commercial real estate sector showcased robust performance. It witnessed exceptional leasing activity across office, retail, and warehousing spaces, reaching all-time highs. This strength in commercial segments contributed to a record inflow of institutional investments, totaling $10.4 billion in 2025, a 17 percent year-on-year increase. The office market, in particular, received the largest share, driven by foreign firms establishing global capability centers.
Official Statements and Responses
Anuj Puri, Chairman of Anarock, described 2025 as a "wild year" impacted by global events. He noted that the previously sky-high double-digit price jumps cooled to single digits this year. Shekhar Patel, National President of CREDAI, highlighted that housing demand remained resilient despite global volatility and that demand consolidation towards big, branded developers gained momentum.
Future Outlook
Real estate developers are now pinning their hopes on 2026 for a demand revival. Key factors expected to drive this recovery include lower mortgage rates, sustained GDP growth, and potential tax relief in the upcoming Union Budget. Industry bodies CREDAI and NAREDCO are advocating for a revision in the definition of affordable housing, proposing an increase in the price cap to ₹90 lakh from the current ₹45 lakh, which they believe would benefit consumers and stimulate demand. They also hope for tax incentives for affordable housing projects.
The Reserve Bank of India's reduction of the repo rate by 125 basis points this year is seen as a positive step that could lead to lower home loan interest rates. Developers believe that if these supportive measures materialize, housing supply and demand could rise significantly in the coming year.
Impact
This news directly affects India's real estate sector, impacting construction, finance, and related industries. It signals a challenging market for affordable housing buyers but opportunities in the luxury and commercial segments. The performance of real estate is a significant indicator of broader economic health.
Impact Rating: 8/10
Difficult Terms Explained
- Sales volume: The total number of new homes sold during a period.
- Sales bookings value: The total monetary worth of new homes sold.
- Affordability: The extent to which people can afford to buy housing, considering income levels and property prices.
- Luxury residences: High-end properties typically featuring premium amenities, larger spaces, and prime locations, targeting affluent buyers.
- Institutional investments: Funds invested by large organizations like pension funds, insurance companies, and private equity firms into real estate.
- Commercial real estate: Property used for business purposes, including offices, retail spaces, and industrial/warehousing facilities.
- Repo rate: The interest rate at which the Reserve Bank of India lends money to commercial banks. A lower repo rate generally leads to lower interest rates on loans, including home loans.
- GST: Goods and Services Tax, a tax levied on the supply of goods and services.
- REIT: Real Estate Investment Trust, a company that owns, operates, or finances income-generating real estate.