India's residential real estate market is experiencing a structural shift toward premium and luxury housing, with affordable homes losing significant market share in new launches. According to CareEdge Ratings, the ₹1.5-4 crore segment's share rose sharply from 14% in Q1 2022 to 34% in Q1 2025 and 44% in Q1 2026. The luxury segment has also expanded dramatically, with homes priced above ₹4 crore accounting for 9% of new launches in Q1 2026, compared with just 1% in Q1 2022. This trend reflects developers' growing focus on mid-premium and luxury housing, driven by customer preferences and rising land acquisition, construction and compliance costs that have affected the viability of affordable housing projects.
The financial health of Indian residential developers has shown marked improvement, with the debt-to-collections ratio falling from 1.80 times in FY20 to 0.68 times in FY26, indicating sustained deleveraging. While debt levels remained broadly range-bound, collections from sizeable launches rose to more than ₹90,000 crore, while bookings crossed ₹1.5 lakh crore in FY26. This improvement provides financially stronger developers with a cushion against potential pressures from higher construction and energy costs, interest-rate volatility, tighter liquidity and near-term uncertainty in housing demand. However, CareEdge Ratings cautioned that small and medium-sized developers could face greater pressure given their weaker balance sheets and limited financial flexibility.
Housing sales across India's top cities showed sharp city-wise divergence in Q1 2026, with sales declining 11% in Pune and Delhi-NCR, while the Mumbai Metropolitan Region recorded a 7% decline. According to CareEdge Ratings, this weakness is attributed to affordability pressures following sustained price appreciation, normalisation after a strong multi-year upcycle and cautious buyer sentiment amid geopolitical and financial-market uncertainty. In contrast, southern markets remained comparatively resilient, with Chennai recording 9% growth in housing sales, followed by Bengaluru at 5% and Hyderabad at 1%. These markets benefited from steady end-user demand, employment-linked housing requirements and new project activity.
The shift toward premium housing is driven by demand from affluent domestic buyers and NRIs, along with a preference for larger homes and premium amenities. As reported by CareEdge Ratings, this trend reflects India's broader wealth creation story, with demand increasingly driven by first-generation entrepreneurs, startup founders, CXOs, professionals, global Indians and NRIs. Pratik Tibrewala, SVP & Head Corporate Finance at M3M India, noted that traditional business families continue as important customer segments, but today's demand is increasingly driven by affluent homeowners monetising independent houses and upgrading to modern luxury developments offering branded residences, world-class amenities and enhanced security.
The emerging picture for India's residential real estate sector is not one of broad-based weakness but of a market increasingly split between premiumisation-led demand and affordability-constrained segments. According to CareEdge Ratings, housing sales across the top seven cities declined by a low single-digit percentage in Q1 2026 compared with Q1 2025. The divergence between segments is particularly notable, with premium and luxury housing remaining resilient while affordable and middle-income housing faces greater pressure from inflation, elevated property prices and affordability constraints. This structural shift reflects the market's evolution toward higher-value segments as developers adapt to changing buyer preferences and economic realities.
