The Numbers Don't Lie
Recent data reveals a dramatic transformation in India's residential property market. According to a report by CareEdge Ratings, homes priced below ₹1.5 crore accounted for a staggering 85% of new launches in the top seven cities in the first quarter
of 2022. Fast forward to the first quarter of 2026, and that share has plummeted to just 47%. In just four years, the segment that was once the backbone of the market has become less than half of all new supply. Simultaneously, the premium and luxury segments have boomed. Homes in the ₹1.5 crore to ₹4 crore bracket surged from a 14% share of new launches in 2022 to 44% in 2026. The ultra-luxury category, with homes priced above ₹4 crore, expanded its share from a mere 1% to 9% in the same period. This isn't just a minor fluctuation; it's a fundamental pivot by developers away from the mass market.
Why Are Developers Shifting Focus?
The change is not happening in a vacuum. Developers are grappling with a dual challenge: rising costs and shifting demand patterns. The prices of essential construction materials like cement and steel have climbed significantly, alongside higher labour costs. Compounding this is the scarcity and soaring price of land in prime urban and even semi-urban areas. These factors have squeezed profit margins on affordable and mid-income projects, making them less financially viable for developers. As one report noted, rising land, construction, and compliance costs have directly impacted the viability of affordable housing projects. At the same time, a resilient demand from affluent domestic buyers and Non-Resident Indians (NRIs) has created a lucrative market at the higher end. These buyers are often less sensitive to inflation and interest rate hikes, providing a more stable revenue stream. Developers, with their balance sheets stronger than in previous years, are simply following the money.
A Tale of Two Markets
The impact on homebuyers is creating a divided market. For those with significant disposable income, the options are expanding, with developers launching projects focused on premium amenities, larger spaces, and even wellness-centric living. However, for the average salaried individual and first-time homebuyer, the goalposts have shifted. With fewer new homes being launched in their budget, they are forced to either stretch their finances, compromise on location and size, or postpone their purchase altogether. Overall housing sales have moderated in major markets like Pune, Delhi-NCR, and the Mumbai Metropolitan Region (MMR), with affordability pressures being cited as a key reason. Interestingly, while sales volumes have softened in some areas, the total value of homes sold has continued to grow, underscoring the market's pivot towards higher-priced properties. Southern cities like Chennai and Bengaluru have shown more resilience, supported by steady end-user demand linked to employment.
The Affordability Squeeze
Affordability is the central issue. While home loan interest rates have provided some relief, consistently rising property prices have eroded those gains. Price-to-income ratios in most major metropolitan areas are estimated to be stretched, making it difficult for many households to enter the property market. Even though overall sales in the top seven cities declined by a low single-digit percentage in the first quarter of 2026, property prices continued to climb. The situation has led some analysts to point out a stark reality: if the middle class can't afford homes, developers will simply stop building for them. While this makes business sense, it leaves a significant portion of the population with dwindling options. The supply of homes priced under ₹40 lakh, for instance, has shrunk to just 6% of new launches in some recent quarters.
