India Ratings and Research has projected a modest growth rate of 5-7% for the residential real estate sector in FY27. This forecast comes after a period of robust expansion during FY23 to FY25, followed by a slowdown in FY26. The anticipated subdued growth is attributed to increased property prices that have diminished affordability, particularly impacting mid-market segments. Even in premium segments, affordability is becoming a significant concern, as noted by the rating agency. The report highlights that while absorption rates and property prices have been buoyed by a shift towards luxury and high-end offerings, the high base established in the preceding years is likely to dampen growth potential in FY27.
The residential real estate landscape is further complicated by the performance of IT-dependent markets, particularly in cities like Bengaluru and Hyderabad. The slowdown in net headcount additions among large IT firms, combined with the effects of automation and artificial intelligence, is leading to reduced demand for housing in these regions. India Ratings emphasizes that these factors are contributing to a cautious outlook for the sector. Despite these challenges, the agency maintains a neutral stance on the overall residential real estate market for the coming fiscal year.
In contrast to these projections, many property developers remain optimistic about the market's performance. Niranjan Hiranandani, managing director at Hiranandani Group, acknowledges the potential for localized challenges but suggests that the premium segment continues to thrive. He believes that while some slackness may occur following four years of strong growth, the affordable housing segment faces more significant issues. Similarly, Sarthak Seth, head of Sales and Marketing at Tata Realty & Infrastructure, expresses confidence that despite recent setbacks influenced by global economic factors, the second half of the fiscal year will witness a recovery in demand.
India Ratings anticipates that the residential market will see year-on-year sales growth of 5-7% in FY27, primarily driven by value appreciation. The agency notes that housing prices in the top eight metropolitan areas have experienced a compound annual growth rate (CAGR) of 9% post-pandemic, with prices remaining high at 12% as of September 2025. The firm also highlights the potential for mid-market housing demand to be supported by interest rate reductions and higher income tax slabs, which could enhance consumer savings. As the market navigates these evolving dynamics, the contrasting perspectives from analysts and developers illustrate a complex landscape for the residential real estate sector in India.