Indian Real Estate Sector Poised for Continued Growth, Driven by Structural Reforms and Shifting Market Dynamics

Mumbai, India – June 19, 2025 – The Indian real estate sector is projected to maintain robust growth through the Financial Year 2026 (FY26), based on a significant surge in residential sales that saw nearly a 77% increase from FY19 to FY25 in key cities.

This optimistic outlook is attributed to the impact of ongoing structural reforms, rapid urbanisation, and sustained investor interest from both domestic and global sources, as detailed in the latest India Real Estate Report FY 2025-26 by Grant Thornton Bharat.

The report emphasises that the industry is undergoing rapid transformation, influenced by technological advancements, sustainability imperatives, and evolving consumer behavior and investor confidence

Key Findings and Sectoral Trends

• Resilience of the Residential Market and Premium Shift:
  
  • Despite prevailing concerns about affordability, the residential market has demonstrated considerable resilience.
  • Residential sales in key cities registered a substantial increase of nearly 77% between FY19 and FY25.
  • Under-construction homes accounted for 57% of transactions in FY25, indicating strong buyer confidence in ongoing projects.
  • The affordable housing segment exhibited a mixed performance, experiencing a 9% decline in sales during Q1 2025. However, a corresponding 19% reduction in inventory levels suggests a gradual market correction and recovery.
  • Conversely, demand for luxury homes (those priced above ₹1 crore) witnessed a significant uptick, primarily fueled by rising disposable incomes and evolving lifestyle preferences.
• Investor Focus on Future-Ready Assets
  • Investment flows in FY25 exhibited a clear strategic shift toward operational residential developments, income-generating commercial properties, and logistics platforms.
  • This trend reflects a strong investor appetite for high-quality, Grade A assets.India recorded 99 real estate deals valued at $6.99 billion during FY25. Private equity investments constituted nearly half of this total, at $3.15 billion. Public market activities, including Initial Public Offerings (IPOs) and Qualified Institutional Placements (QIPs), contributed $2.99 billion, underscoring robust capital market confidence in the sector.

• Technology and Green Trends Backing The New Cycle:
  
  • Advanced technologies such as blockchain, Artificial Intelligence (AI), and the Internet of Things (IoT) are fundamentally transforming property acquisition and sales processes. Virtual reality tours and smart home features are increasingly becoming standard offerings.
  • The report suggests that “tokenisation of real estate can democratise access and improve liquidity if supported by regulation.”
  • Sustainability has emerged as a central theme, with Environmental, Social, and Governance (ESG)-compliant projects gaining preference from both institutional investors and end-users. The report observes, “We’re seeing growing demand for green-certified, wellness-centric housing.”
• Emergence of Tier-2 Growth and Flexible Living:
  
  • Tier-2 cities, including Bhubaneswar, Nagpur, and Jaipur, are rapidly establishing themselves as residential hubs. This growth is being driven by government-led infrastructure development and the expansion of job markets in these regions.
  • Co-living and rental housing models are gaining popularity among younger, mobile professionals, supported by policy initiatives such as the Model Tenancy Act.
  • Jagadish Nangineni, Managing Director of Sobha Group, was quoted in the report, emphasising that “Sustainable design, technology integration and backwards-linked operations are key to scaling and delivering value.” Sobha Group recently achieved Net Water Zero certification for its project in Thrissur, highlighting a practical application of these principles.

Outlook: Consolidation, Digitalisation, and REIT Expansion

Looking ahead, the report forecasts continued traction for Real Estate Investment Trusts (REITs), including the anticipated rise of Small and Medium REITs (SM REITs). Further platform-level consolidations and deeper integration of technology across the sector are also expected.

Shabala Shinde, Partner and Real Estate Industry Leader at Grant Thornton Bharat, concluded, “Despite affordability challenges and global volatility, India’s real estate sector is well-positioned to grow sustainably.”

Disclaimer: At HDFC SKY, we take utmost care and due diligence in curating and presenting news and market-related content. However, inadvertent errors or omissions may occasionally occur.

If you have any concerns, questions, or wish to point out any discrepancies in our content, please feel free to write to us at content@hdfcsec.com.

Please note that the information shared is intended solely for informational purposes and does not make any investment recommendations