India’s residential real estate market appears to be entering a phase of consolidation, with housing demand showing signs of moderation even as property prices remain supported by rising construction costs and land prices.
According to the Knight Frank-NAREDCO Q2 2026 Real Estate Sentiment Index, 74 per cent of supply-side stakeholders expect property prices to remain stable or increase over the next six months, even as housing sales growth moderated in H1 2026.
The current sentiment score declined marginally to 48 in Q2 2026 from 49, while the future sentiment score remained unchanged at 50, indicating that stakeholders do not expect a sharp deterioration in market conditions over the next six months.
However, experts cautioned that the index reflects the sentiment of the supply side of the market and does not directly represent actual homebuyer behaviour, transactions or price movements.
The index is based on the views of developers, investors, architects, consultants and other stakeholders involved in the real estate ecosystem. Experts said sentiment trends may take time to reflect in actual market activity.
For homebuyers waiting for a major correction in property prices, experts highlighted five key signals that suggest a steep fall in prices may be unlikely in 2026.
1) Rising construction, labour and land costs may prevent a sharp price correction
Despite slower demand, experts believe a major decline in property prices may be difficult because input costs continue to remain high.
According to the report, 74 per cent of stakeholders expect property prices to remain stable or increase over the next six months.
Gulam Zia, Senior Executive Director, Knight Frank India, said rising energy costs and geopolitical uncertainties have pushed up construction expenses.
“Due to the Middle East crisis and rising energy costs, construction costs have increased. Developers expect these additional costs to be passed on to buyers, and prices may continue to rise over the next few months,” Zia told Zee Business.
He added that the actual market trend would become clearer over the next three to six months.
NAREDCO President Parveen Jain said higher construction costs, labour expenses, material prices and land costs are among the biggest reasons behind elevated property prices.
He said land prices have increased sharply over the past few years, making it difficult for developers to offer homes at lower prices.
“If a developer purchases land today and develops a project, the selling price required to recover costs leaves limited room for price reduction,” Jain explained.
2) Housing demand is moderating, while developers remain cautious on launches
India’s housing market has seen moderation, with housing sales rising only 1 per cent in H1 2026.
Speaking on Zee Business, Amit Goenka, CMD, Nisus Finance Group, said the decline in sentiment reflects structural changes in the sector.
He pointed out that the sentiment score has fallen from around 65 to 48 over the last nine quarters, indicating significant changes in the real estate market.
According to Goenka, three major factors are affecting housing demand:
- AI-led disruption and uncertainty in the IT sector, especially in technology-driven markets.
- Lower participation from NRI and offshore buyers due to global uncertainty and currency-related concerns.
- Higher land prices and slower peripheral development, which have affected affordability.
He said large developers have become more cautious, with slower new launches and reduced land acquisition activity.
“Development costs have increased, approval costs have increased, and because of these factors, sentiment may continue to remain under pressure,” Goenka said.
However, experts believe the slowdown is more about market consolidation rather than a broad-based collapse.
3) Affordability remains the biggest challenge for middle-class homebuyers
While home loan availability has improved, experts said the overall cost of buying a house has increased significantly.
Goenka said affordable housing supply has reduced even as property prices have risen.
“Affordable housing stock has reduced substantially. The cost of acquisition has increased significantly,” he said.
He added that while financing availability has improved, the actual cost of owning a home has become higher.
Gulam Zia said affordability has become a serious concern, particularly in large metropolitan markets.
“Affordability has already been severely impacted, especially in Mumbai and Delhi. For middle-class buyers, purchasing a house in these cities has become extremely difficult,” Zia said.
Experts suggested that increasing development density, improving connectivity and creating smaller-sized housing units could help improve affordability.
Parveen Jain said higher Floor Space Index (FSI) and better land utilisation can help reduce the overall cost burden for buyers.
4) Limited supply and cautious launches are keeping prices supported
Despite slower demand, developers are not aggressively increasing supply.
Experts said large developers have become cautious about launching new projects and buying land due to rising costs and changing market conditions.
Goenka said developers are focusing more on managing cash flows and inventory rather than aggressively expanding.
He added that buyers are also becoming more careful, reducing upfront payments and delaying home loan decisions until projects reach a certain stage of completion.
This shift in buyer behaviour is changing the way transactions are happening, with homebuyers focusing more on developer credibility and project delivery timelines.
5) Real estate investment is becoming selective as consolidation increases
The real estate sector is witnessing consolidation, with capital increasingly moving towards established developers with strong balance sheets, better governance and proven track records.
Goenka said liquidity is available, but it is becoming increasingly selective.
“Liquidity is available, but it is directional. It is available only for a few sectors and a few players,” he said.
According to him, developers with weak financial positions, poor governance and limited execution history are finding it difficult to raise funds.
He added that consolidation has increased significantly, with the number of developers reducing over the years. Goenka said the number of developers has declined from around 12,000 in 2020-21 to nearly 4,000, indicating a significant consolidation in the sector.
Investors and buyers are now showing greater preference for established developers, even if their projects are priced higher.
Premium housing vs affordable housing 2026
Experts said the residential market is also becoming increasingly divided.
Premium and luxury housing segments have performed better due to stronger demand, while affordable and mid-segment housing continue to face supply challenges.
Parveen Jain said rising land prices have encouraged developers to launch larger premium homes, while smaller affordable homes remain difficult to build due to cost pressures.
However, he added that demand for mid-segment and affordable housing remains strong, provided developers can access land at lower costs and improve project density.
Office real estate remains India’s strongest growth driver
While residential real estate is witnessing moderation, the office segment continues to remain resilient.
India recorded 48 million sq ft of office leasing in H1 2026, while 81 per cent of stakeholders expect office rentals to remain stable or increase.
Gulam Zia said Global Capability Centres (GCCs) have emerged as a major driver of office demand.
“The leasing number of 48 million square feet is significant and shows that India’s office real estate is in safe hands and moving in the right direction,” he said.
However, he cautioned that global uncertainty, geopolitical tensions and AI-led changes remain challenges.
While AI-related job losses have been visible globally, their impact has not yet significantly affected India’s office market, largely due to continued GCC expansion.
Should homebuyers wait for prices to fall?
Experts believe waiting for a steep correction in property prices may not be practical because of:
- Rising construction costs
- Higher land prices
- Limited supply
- Increasing development expenses
However, buyers should carefully evaluate:
- Affordability and loan burden
- Developer credibility
- Project completion record
- Long-term ownership costs
India’s 2026 real estate outlook points towards a two-speed market— residential housing moving through a period of moderation and consolidation, while commercial real estate continues to show resilience.
