Residential real estate sector likely to remain in stabilising phase in FY2026: ICRA
Rating agency ICRA in its latest report has said that the residential real estate sector is likely to remain in a stabilising phase in FY2026. A material rise in the average selling prices (ASP) of residential units by more than 10% annually from FY2023 to FY2025 continues to pose a drag on affordability of buyers.
Owing to this, as well as expected moderation in sales velocity, ICRA projects the area sold in the top seven cities (Mumbai Metropolitan Region (MMR), National Capital Region (NCR), Bengaluru, Hyderabad, Pune, Kolkata and Chennai) in India to decline by 0-3%, reaching 620-640 million square feet (msf) in FY2026. Following a 14% decline in FY2025, ICRA estimates launches to increase by 4-7% to 630-650 msf in FY2026 across the top seven cities. This is likely to be supported by the spillover from the previous year and the current comfortable unsold inventory levels.
Following a period of robust growth in residential sales at a CAGR of 26% during FY2022-FY2024, the residential real estate sector had entered an equilibrium phase in FY2025, which is expected to continue in FY2026. ICRA noted that the area sold saw a decline of 8% to 643 msf in FY2025 due to a sharp contraction in launches along with moderation in sales velocity, primarily in affordable and the mid segment.
As per the report, while the area sold in the luxury segment increased by 6% during FY2025, it declined by 14% and 10% in the affordable and mid segment respectively. This trend continued in Q1 FY2026 with the YoY contraction in sales and launches by 4.6% and 4.1%, respectively. Notwithstanding the slowdown in broader market, the traction in the luxury segment continues in the current fiscal as well, with its share in total sales increasing to 34% in Q1 FY2026 from 30% in FY2024.
