India’s residential real estate sector is expected to see a moderation in growth in the next financial year, following a strong post-pandemic recovery phase, according to a report by Crisil Ratings.
After recording a robust compound annual growth rate of 26% in sales value between FY22 and FY25, the sector is now entering a phase of more measured expansion. Growth in FY26 is estimated to have slowed to 5–7%, impacted by elevated property prices and delays in project launches in some cities due to approval-related challenges.
Looking ahead, sales growth is projected to ease further to 4–6% in FY27, as both demand and price increases stabilise. Average selling prices, which saw sharp gains in recent years, are expected to rise more modestly by 3–5%, reflecting a high base effect.
Industry experts say sustained price increases are likely to weigh on demand, which is forecast to remain largely flat, growing by just 0–2% in FY27. While approval bottlenecks in markets such as Pune and the Mumbai Metropolitan Region may ease, uncertainties remain in cities like Bengaluru.
At the same time, supply is expected to outpace demand, leading to a gradual rise in unsold inventory levels. Inventory is projected to increase to 3.2–3.4 years, compared with less than three years in the previous two financial years.
Despite the softer growth outlook, the sector’s financial health remains stable. Strong collections, aligned with steady construction progress, have supported healthy cash flows and reduced reliance on external borrowing.
The premium and luxury housing segment continues to be a key driver, accounting for an increasing share of new launches. This shift reflects changing buyer preferences for larger homes and better amenities, while also improving developers’ margins.
Crisil expects cash flow from operations to grow by 15–17% in FY27, supported by robust collections. Developers’ credit profiles are therefore likely to remain stable, aided by prudent debt management.
However, risks remain, including weaker-than-expected demand and global geopolitical uncertainties that could impact inflation and housing affordability.
