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Stable credit outlook through FY27 as premium housing, prime commercial offices and institutional funding support resilience; operating margins seen at 33.3% in FY27

India’s real estate sector is estimated to require around INR 50,000 billion (~INR 50 trillion) in capital over the next decade, against expectations that the market will grow to USD 1 trillion by 2030 1 . Despite the scale of this funding requirement, the sector’s credit outlook remains stable through FY27, according to Brickwork Ratings (BWR), supported by resilient demand in premium housing and prime commercial assets, improving margins and continued access to institutional capital.

Revenue growth, however, is expected to moderate sharply to -0.2% in FY26 from 15.8% in FY25, before recovering to 5.5% in FY27. Residential sales across leading cities increased 31% YoY, while luxury housing prices appreciated 10%-12% in FY25. At the same time, price volatility, rising construction costs and changing demand across housing segments are likely to weigh on near-term growth.

Margins strengthen despite slower revenue growth

Operating margins are expected to improve to 32.0% in FY26 from 30.1% in FY25 and stabilise at 33.3% in FY27. Inventory clearance and a higher contribution from premium residential projects, data centres and warehousing spaces are expected to support profitability.

Financial resilience is also underpinned by relatively low gearing among top-tier developers, greater use of joint development agreements instead of debt-heavy funding models, and strong pre-sales collections. Private equity funding and REIT listings are further supporting liquidity and leverage management.

Interest coverage is expected to remain steady at 2.8x in FY26, while the debt service coverage ratio is projected at 1.1x, providing some financial headroom despite higher construction borrowing and mezzanine funding requirements.

Capital needs and demand are shifting across segments
Residential development is expected to account for the larger share of the sector’s ~INR 50 trillion capital requirement, given its weight in overall sector activity. Institutional capital, however, remains more concentrated in commercial real estate: office assets accounted for over 40% of India’s institutional real estate inflows in H1 2026, at ~USD 1.9 billion, compared with roughly USD 0.5 billion for residential².

BWR’s analysis of a sample of listed housing construction companies also highlights the capital intensity at the company level. The sample carried ~INR 2,340 billion of unsold inventory and ~INR 1,090 billion of total borrowings on balance sheet in FY25, against ~INR 1,240 billion of customer advances.

Within housing, growth is increasingly shifting towards higher-ticket segments. Premium and luxury housing account for over half of new launches nationally, while affordable housing’s share fell to 6% in Q2 2026 from nearly 52% in 2018. The premium (INR 10 million+) segment’s share of launches across the top seven cities rose from 45% in Q1 2025 to 64% in Q1 2026³. This shift is reflected in the outlook for FY27: home sales value across leading cities is projected to rise 10–12%, even as unit volumes decline by roughly 3–4%.

Supply is expected to remain elevated through CY27, with residential launches above 300,000 units in 2026⁴. The top eight cities added roughly 187,000 units in H1 2026 alone⁵, implying annual supply of around 350,000–400,000 units through CY26–CY27 if the pace is sustained. Mumbai, Bengaluru and Pune together accounted for close to 60% of launches in early 2026.

Key risks remain concentrated in inventory and refinancing
Unsold inventory remains a concern, with Mumbai and Pune carrying housing stock equivalent to more than 30 months of sales. Elevated inventory could delay new project launches and pressure cash flows, while refinancing requirements remain vulnerable to movements in interest rates.

Overall, BWR expects resilient demand for premium housing and prime commercial offices, alongside continued institutional investor support, to underpin the sector’s credit profile through FY27. However, developers’ ability to manage elevated supply, inventory and funding requirements will remain critical to sustaining financial resilience.

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