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Imagine a house with two doors. One opens into a lavish, sun-drenched ballroom; the other into a dark, empty hallway. That’s India’s housing market in a snapshot. Luxury homes are having a moment, breaking sales records in glittering metros. Meanwhile, affordable housing for the majority is stuck, weighed down by rising costs and supply gaps. A market of stark contradictions.
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Today’s reading time is 6 mins.
Housing Market
The Promise and the Contradiction
India’s housing market is a tale of contrasts: luxury and premium segments in metros are booming, while affordable housing for the majority struggles amid rising costs, supply gaps, and policy bottlenecks. Tier 2–3 cities and senior-focused financing present untapped opportunities, but structural challenges must be addressed to sustain inclusive growth.
India’s real estate sector is one of the most prominent globally, ranking just behind agriculture as the country’s largest employer. Over the next decade, it is projected to grow by an ambitious 30%. At the heart of this is the housing sector, which accounts for nearly 80% of the market.
On paper, the outlook is dazzling: rising urbanisation, income growth, and infrastructure expansion suggest a vibrant and resilient market. Yet beneath these headlines, a contrasting picture emerges. While luxury and premium housing are racing ahead, the segment meant for the majority — the affordable housing market — is struggling to keep pace.
India’s Housing Sector, An Overview
Valued at approximately USD 482 billion in 2024, India’s real estate market is projected to more than double to USD 1,184 billion by 2033, reflecting a CAGR of 10.5%. Residential real estate dominates here accounting for nearly 80% of total market value. Beyond its economic contribution, housing is a critical employment engine, absorbing urban migration and supporting a growing middle class.
Key drivers include:
Urbanisation: Migration to cities continues to fuel demand.
Income Growth: Rising household earnings enable higher homeownership aspirations.
Infrastructure Upgrades: Improved connectivity and urban projects enhance real estate appeal.
Policy Support: Government initiatives and regulatory frameworks support both developers and buyers.
Winners
Luxury, Premium, and Metro Markets
The Premium Growth Engine
Data from multiple sources shows a clear trend: metros are seeing rapid growth in high-end segments. JLL reports that in H1 2025, homes priced above ₹1 crore accounted for 62% of total residential sales, up from 51% the previous year, with the ₹3–5 crore segment growing 14%. Consultancies like KPMG and CBRE echo this optimism, citing rising incomes, infrastructure improvements, and urban development as key drivers. Micro-markets — particularly infrastructure-led localities with new employment hubs — are emerging as hotspots, with cities like Kolkata seeing a 325% YoY increase in premium home launches.
Luxury dominance is widening the gap further. In Hyderabad, flats priced above ₹3 crore now constitute over a third of total sales by value, leaving affordable segments increasingly sidelined. Even as overall residential sales volumes stagnate, metros continue to exhibit strong price appreciation, making the luxury segment a key engine of growth. Rising incomes, infrastructure improvements, and urban development continue to fuel demand in these segments, especially in infrastructure-led localities with new employment hubs. Noida’s Sector-150 has witnessed staggering price gains, making it one of the most sought-after areas for both investors and homebuyers, whereas the emergence of new urban corridors like “Third Mumbai” is expected to further transform the landscape of India’s financial capital.
Opportunities and Challenges
Affordable Housing and Tier 2/3 Cities
Affordable Housing: Demand Outpacing Supply
While luxury dominates headlines, affordable housing faces headwinds. EY projects demand for 24.4 million affordable units by 2025, yet supply is shrinking. Anarock notes its share of residential sales fell to 18% in H1 2025, down from 37% in 2021. Rising input costs, weak policy execution, and external shocks like U.S. tariffs on building materials — up to 50% — further squeeze developers’ ability to deliver cost-effective homes.
Sales volumes confirm the stress. PropTiger reports a 14% drop in housing sales across eight major cities in Q2 2025, while JLL shows sub-₹1 crore apartments plummeting 32% in H1 2025. The Indian Express adds that homes priced below ₹40 lakh have slid from 37% of total sales in 2021 to just 18% by mid-2025. Analysts warn that high unsold inventory and rising rents (5–9%) could deepen affordability challenges even as premium demand remains resilient.
Tier 2–3 Cities: Growth Potential Amid Constraints
Smaller cities are gaining relevance. Jaipur, Indore, Kochi, and Lucknow are seeing demand from reverse migration and remote work. These markets currently account for only about 30% of the residential sector but offer advantages such as lower construction costs, faster project timelines, and growing infrastructure. Developers benefit from lower labor costs, making organized real estate increasingly attractive.
Yet recovery is uneven. UBS data shows Gurugram leading a modest rebound (+2% YoY) with sales up 68%, while larger hubs like Mumbai, Pune, MMR, and Bengaluru continue to see steep declines. Property prices, however, keep climbing — Gurugram (+40%), Chennai (+21%), Bengaluru (+14%). A Reuters poll cautions that although prices may rise 6% in 2025 and 5% in 2026, unsold inventory and weak affordable supply signal stress points ahead.
The Contradiction
Despite concessions and incentives, housing in metros like Mumbai remains unaffordable. The state’s Deputy Chief Minister has questioned why infrastructure upgrades have not translated into lower prices, urging developers to prioritize affordable homes in new zones. Meanwhile, luxury segments thrive — in Hyderabad, flats priced above ₹3 crore now make up over a third of total sales by value, further sidelining lower-priced options.
Together, these trends illustrate a housing market of contrasts: while premium and luxury segments surge, middle- and lower-income buyers face persistent barriers. The picture is neither entirely bleak nor rosy — it is a market where growth and gaps coexist, and where financing, policy, and infrastructure choices will shape the next phase.
The Dual-Speed Reality
Warning Signs and Market Stress
While headlines and forecasts paint an optimistic picture of India’s housing market, our research reveals a more nuanced reality — a sector operating at two distinct speeds.
1. Metros: Luxury in the Fast Lane
High-end and luxury segments continue to drive momentum in metropolitan cities. Data from JLL and Anarock highlights that:
Premium homes (₹1 crore+) accounted for 62% of residential sales in H1 2025, up from 51% in H1 2024 (JLL).
Within this, properties in the ₹3–5 crore range grew 14% in demand, reflecting strong appetite among affluent buyers (JLL).
Even as overall residential sales volumes stagnate, metros continue to exhibit strong price appreciation, making the luxury segment a key engine of growth.
2. Tier 2–3 Cities: Growth Potential, Structural Hurdles
Smaller cities are emerging as important growth corridors, fueled by reverse migration post-COVID and the rise of remote work:
Tier 2–3 cities such as Lucknow, Indore, Jaipur, and Kochi are attracting demand, particularly from middle-class buyers seeking affordability and larger living spaces.
Developers benefit from lower labor costs and faster project completion, making these cities increasingly attractive for organized real estate development.
Despite potential, these markets currently make up only ~30% of India’s residential sector, highlighting untapped opportunity.
Challenges remain: financing gaps, limited policy penetration, and infrastructure bottlenecks slow growth, preventing these cities from reaching full potential (FICCI, CREDAI-EY, Anarock).
3. Affordable Housing: Demand Intact, Supply Constrained
The segment intended for the majority of Indian homebuyers is facing persistent pressures:
Demand remains strong, with 24.4 million affordable units projected by 2025 (EY).
Supply lags due to rising input costs and weak penetration of schemes like PMAY-U (Anarock).
External factors such as U.S. tariffs on building materials and local policy gaps further squeeze developers’ ability to deliver cost-effective housing (The Times of India; EY).
As a result, affordable housing’s share of residential sales fell to 18% in H1 2025, down from 37% in 2021 (Anarock).
Trends
The Road Ahead
Key Insights & Trends
Metros are seeing luxury and premium launches dominate sales, with high-end homes accounting for 62% of H1 2025 residential transactions (JLL).
Tier 2–3 cities — Lucknow, Indore, Jaipur, Kochi — are emerging growth corridors, aided by lower labor costs, faster completion, and reverse migration (Track2Realty, RealtynMore).
Affordable housing remains constrained despite strong demand; supply gaps, rising construction costs, and weak penetration of government schemes (PMAY-U) continue to limit reach (Anarock, EY).
Micro-markets with strong infrastructure, connectivity, and employment hubs are driving hyper-local price surges, while larger metros see uneven recovery in volumes (ANAROCK, ET).
Rising home prices, particularly in premium segments, are pushing affordability challenges into sharper focus, signaling potential stress in the mass-market segment.
India’s housing sector is living in two worlds at once. On one track, luxury and premium housing is breaking records, with multi-crore sales in metros and developer confidence at all-time highs. On the other, affordable housing — the segment serving most buyers — is losing momentum, constrained by costs, financing gaps, and weak policy execution.
Without targeted interventions in financing, policy reach, and supply-side solutions, market growth risks becoming uneven and unsustainable. Tier 2–3 cities provide opportunities, but structural challenges persist, while high metro prices may increasingly push buyers to peripheral zones or smaller cities.