Premium Housing Takes Centre Stage as Affordable Home Supply Shrinks: Report

India’s housing market is undergoing a significant shift, with real estate developers increasingly focusing on premium and luxury homes while the share of affordable housing in new launches has fallen sharply in recent years, according to a report by CareEdge Ratings.

The change is particularly visible across the country’s top seven cities. In the first quarter of 2022, homes priced below Rs 1.5 crore made up around 85 per cent of all new housing launches. By Q1 2025, their share had dropped to 57 per cent and declined further to just 47 per cent in Q1 2026.

At the same time, the mid-premium segment has expanded rapidly. Homes priced between Rs 1.5 crore and Rs 4 crore accounted for 14 per cent of new launches in Q1 2022. Their share increased to 34 per cent in Q1 2025 and reached 44 per cent by Q1 2026.

The luxury segment has also gained ground. Homes costing more than Rs 4 crore, which represented only 1 per cent of new launches in Q1 2022, accounted for 9 per cent by Q1 2026.

CareEdge Ratings attributed the shift to a combination of changing consumer preferences and rising costs faced by developers. Higher land acquisition, construction and regulatory compliance expenses have made many affordable housing projects less financially attractive, encouraging developers to concentrate on segments where margins are stronger.

Rajashree Murkute, Senior Director at CareEdge Ratings, said developers are increasingly targeting mid-premium and luxury housing in response to market conditions.

The demand side has also supported this trend. Affluent domestic buyers and non-resident Indians (NRIs) continue to show interest in larger homes equipped with premium amenities, prompting developers to dedicate more of their new supply to luxury and ultra-luxury projects.

Despite uncertainty in the global economic and geopolitical environment, the financial position of major residential developers has improved, the report said. Strong collections, fresh fundraising and debt reduction have helped strengthen their balance sheets and improve their ability to withstand market volatility.

The debt-to-collections ratio among leading developers fell significantly from 1.80 times in FY20 to 0.68 times in FY26. Although overall debt levels remained broadly within a similar range, strong collections from major project launches crossed Rs 90,000 crore in FY26, while bookings exceeded Rs 1.5 lakh crore.

However, housing demand has not been uniform across major markets. Sales in Q1 2026 fell by 11 per cent each in Pune and Delhi-NCR, while the Mumbai Metropolitan Region recorded a 7 per cent decline.

The report linked the weakness in these markets to affordability concerns following several years of price increases, a normalisation after a strong multi-year housing cycle and cautious consumer sentiment amid geopolitical and financial-market uncertainties.

Southern cities, meanwhile, showed greater resilience. Housing sales increased 9 per cent in Chennai, 5 per cent in Bengaluru and 1 per cent in Hyderabad during the quarter.

Steady end-user demand, employment-driven housing requirements and continued project launches helped support these markets.

The latest trend indicates that while India's overall housing market remains healthy, the composition of new supply is changing rapidly. Developers are increasingly moving towards higher-value homes, leaving affordable housing with a significantly smaller share of the new residential pipeline.
 

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