According to ratings agency Icra, residential sales in India’s seven major cities are expected to decline by up to 3% year-on-year in FY26, reaching 620-640 million square feet (msf). This forecast comes after a decline in sales velocity, which has slowed down the growth of the residential sector. In FY25, sales stood at 643 msf, representing an 8% year-on-year decrease. This slowdown was primarily driven by a sharp contraction in new launches and moderated demand in the affordable and mid-income segments.
The residential sector had previously experienced a strong period of growth, with a compound annual growth rate of 26% in area sales between FY22 and FY24. However, this growth has now plateaued, and the sector has entered an equilibrium phase. Icra’s projections suggest that the sector is expected to stabilize at a lower growth rate, with sales declining by up to 3% in FY26.
The decline in sales velocity is a key factor contributing to the slowdown in the residential sector. This decline is likely due to a combination of factors, including increased interest rates, higher property prices, and reduced demand from buyers. Additionally, the contraction in new launches has reduced the availability of new housing units, which has further contributed to the slowdown.
The affordable and mid-income segments have been particularly affected by the slowdown, with demand moderating in these segments. This is likely due to the fact that these segments are more sensitive to changes in interest rates and property prices, and buyers in these segments may be more cautious in their purchasing decisions.
Overall, Icra’s projections suggest that the residential sector in India’s seven major cities is expected to experience a decline in sales in FY26, following a period of strong growth. The sector is expected to stabilize at a lower growth rate, with sales declining by up to 3% year-on-year. The slowdown is driven by a combination of factors, including increased interest rates, higher property prices, and reduced demand from buyers.