A Market Tilting Towards Luxury
The Indian residential market is experiencing a significant 'premiumisation' wave. This means developers are increasingly launching and selling more expensive homes, while the share of affordable housing shrinks. According to recent data from CareEdge
Ratings, homes priced below ₹1.5 crore constituted only 47% of new launches in the top seven cities in the first quarter of 2026, a dramatic drop from 85% in the same period of 2022. In stark contrast, the share of homes priced between ₹1.5 crore and ₹4 crore surged from 14% to 44% in the same timeframe. Data from other property consultants confirms this trend, with some reports noting the affordable segment—defined as homes under ₹40 lakh—has contracted to as little as 6-10% of new supply in major markets. This isn't just a marginal change; it's a fundamental reshaping of the housing landscape.
The Supply-Side Squeeze
Developers are not abandoning the affordable segment by choice, but due to harsh economic realities. A primary driver is the sharp increase in input costs. The prices of essential materials like steel and cement, along with labour and logistics, have surged, with overall construction costs rising by over 25-34% in the last few years. This disproportionately affects affordable projects, where margins are already thin—often just 10-12%, compared to 25-30% for premium projects. Compounding this is the soaring price of land in and around major urban centres, which makes building low-cost housing economically unviable. Faced with these pressures, developers are strategically pivoting to the premium and luxury segments where they can more easily absorb higher costs and secure healthier profits from a less price-sensitive pool of buyers.
A Post-Pandemic Shift in Buyer Demand
The trend isn't solely driven by supply-side economics. The COVID-19 pandemic permanently altered homebuyer preferences. The era of remote work and online schooling created a new-found demand for larger homes with dedicated workspaces, balconies, and better amenities. Before the pandemic, proximity to the office was a primary concern, and smaller homes were acceptable. Now, buyers prioritise space, comfort, and lifestyle, and are often willing to move to suburban areas to get it. This shift naturally pushes buyers up the price ladder. Furthermore, there's a growing segment of affluent buyers and NRIs with higher disposable incomes who are fuelling demand for high-end, technologically advanced homes. This resilient demand at the top end of the market gives developers the confidence to focus their resources there.
The Widening Affordability Gap
The most significant consequence of this premiumisation trend is the immense pressure it puts on first-time and middle-income homebuyers. While sales in the premium segment have grown, the affordable and mid-range segments have seen a contraction. Sales of homes priced below ₹50 lakh fell by 17% year-on-year in 2025, while the mid-segment (₹50 lakh to ₹1 crore) also saw an 8% decline. This creates a widening gap where the supply of new homes does not match the needs of a large portion of the population. Urban India already faces a significant shortage of affordable homes, and this trend only exacerbates the problem. For millions of families, the challenge is no longer just about affording a home, but finding one available to buy in their budget at all.
