Indian Housing Market 2026: Slower Sales Growth, But Prices Continue to Climb, Says Crisil

The Indian real estate sector, a significant driver of economic growth, is poised for a period of moderate adjustment in the coming fiscal year, according to a new report by Crisil. While the exhilarating pace of sales growth witnessed in FY25 is expected to decelerate slightly in FY26, property prices are projected to continue their upward trajectory. This nuanced outlook paints a picture of a maturing market, adapting to evolving macroeconomic conditions and shifting consumer preferences.

FY26 Housing Market Forecast: A Balanced Perspective

Crisil's report forecasts a marginal slowdown in housing sales growth for FY26, predicting a rise of 5-7% compared to the robust 15-17% growth observed in FY25. This moderation, however, is not indicative of a market downturn, but rather a return to a more sustainable growth trajectory after a period of exceptionally high demand. Several factors contribute to this anticipated slowdown.

Key Factors Influencing Housing Sales Growth in FY26:

• Interest Rate Hikes: The Reserve Bank of India's (RBI) monetary policy tightening, aimed at curbing inflation, has led to increased home loan interest rates. This makes homeownership slightly less affordable, potentially dampening demand, particularly in the entry-level and mid-segment housing markets. Understanding the impact of home loan interest rates on affordability is crucial for potential buyers.

• Increased Construction Costs: Rising input costs, including cement, steel, and labor, have pushed up construction expenses, influencing the final price of new properties. This increase in construction costs inevitably translates into higher property prices, impacting affordability for some buyers.

• Regulatory Changes: Ongoing regulatory changes and compliance requirements in the real estate sector can impact project timelines and add to the overall cost of development. These complexities might influence the availability of new housing inventory in certain markets. Understanding the impact of RERA and other regulations is key for both buyers and developers.

• Improved Affordability In Select Pockets: While overall affordability might be slightly squeezed, certain geographic locations are still experiencing higher demand relative to supply, suggesting a localized surge in growth.

Despite the expected slowdown in sales growth, Crisil anticipates a continued rise in property prices, albeit at a moderated pace. They project a price appreciation of 5-7% in FY26, compared to a higher growth rate in the previous fiscal year. This projected increase in property prices is primarily due to the persisting demand-supply imbalance in many key markets.

Regional Variations in the Housing Market:

The Indian housing market is far from monolithic. Regional disparities in demand, supply, and economic growth will continue to influence market dynamics. Metropolitan cities like Mumbai, Delhi-NCR, Bengaluru, and Chennai are expected to experience a sustained, though moderated, increase in prices due to high demand and limited supply. However, Tier-2 and Tier-3 cities may see a more varied performance based on local economic conditions and infrastructure developments. Analyzing real estate prices in major cities is crucial for investors and buyers alike.

Understanding the Premium Housing Segment:

The luxury and premium housing segments are anticipated to exhibit more resilience compared to the affordable housing segment, driven by continued high demand from high-net-worth individuals (HNIs) and Non-Resident Indians (NRIs). The luxury sector is less susceptible to fluctuations in interest rates and broader economic concerns. Monitoring luxury housing market trends is important for luxury developers and investors.

The Importance of Affordability and Sustainable Growth:

Crisil's report underscores the significance of maintaining affordability in the housing sector to ensure sustainable growth. While price appreciation is inevitable, excessive increases can stifle demand and hinder the sector's long-term prospects. Government policies, including affordable housing initiatives, remain critical in broadening access to homeownership. This underscores the importance of affordable housing schemes and their impact on market accessibility.

Opportunities and Challenges for Stakeholders:

The predicted slowdown presents both opportunities and challenges for different stakeholders in the housing market.

For Developers: Strategic pricing, focusing on quality, and incorporating sustainable building practices are crucial for attracting buyers in a more cautious market.

For Buyers: Thorough due diligence, understanding financing options, and carefully assessing market conditions before making a purchase are vital steps.

For Investors: Diversification across segments and locations, alongside meticulous risk assessment, is essential for managing potential volatility.

Conclusion: Navigating the Changing Landscape of the Indian Housing Market

The Indian housing market is entering a phase of balanced growth, with a moderate slowdown in sales and continued, albeit moderated, price appreciation expected in FY26. This transition presents a complex scenario that requires careful consideration by all stakeholders. By understanding the key factors influencing market dynamics, stakeholders can effectively navigate this evolving landscape and capitalize on emerging opportunities while mitigating potential risks. Monitoring key real estate market indicators remains crucial for making informed decisions. The future of the Indian housing market depends on finding a delicate balance between sustainable growth, affordability, and a healthy supply-demand equilibrium.