India Ratings and Research (Ind-Ra) has maintained a neutral outlook for the residential real estate sector for FY27. The agency expects the residential real estate sector to see subdued growth in FY27, following strong growth during FY23-FY25 and slow growth in FY26. Absorption and prices have largely been supported by growth in the premium and luxury segments, shifting supply preferences to upmarket segments. The high base over FY23-FY25 is likely to dampen growth rates in FY27.

Ind-Ra expects yoy sales growth to be up 5%-7% yoy in FY27, largely contributed by value growth. Post-pandemic aggregate housing prices in the top eight metros surged by a CAGR of 9% and remained high at 12% at end-September 2025. Irrespective of macro cyclicality, slower net headcount additions across large Indian information technology (IT) services firms and role consolidation due to artificial intelligence (AI)/automation are reducing near-term upgrade demand in IT-dependent housing markets such as Bengaluru, Pune and Hyderabad.

Affordability Is Now Unfavourable: Elevated property prices have reduced the affordability factor, which drove growth in the past three years. Demand dynamics in the mid-market has remained challenged, however even the premium segments affordability is turning into a headwind. The sector posted a five-year CAGR for 1HFY26 in the band of 5% to 30% across the top eight cities, with Hyderabad, MMR, and NCR posting plus 20%. Although Chennai, Pune and Kolkata posted less 12% growth, Ind-Ra estimates that price changes have been faster than changes in income levels. Interest rates reduction and higher income tax slabs leading to higher savings in the hand of consumers could support mid-market housing demand in FY27.

“The sector cycle has peaked the post pandemic growth phase and is now entering a period of moderated expansion. After strong sales momentum through FY25, growth could moderate in FY26 and FY27 due to a high base and affordability pressures led by elevated property prices. While the mid-income and premium segments are relatively resilient, the affordable/ mid-income segment may remain exposed to cyclicality. Tier II and III cities, which recorded robust growth during 2021–2024, are also witnessing slower growth,” Srinivas Menon, Associate Director, Corporate Ratings, Ind-Ra.

Mumbai Metropolitan Region (MMR) forms the largest micro-market, with a 26% share in the top eight real estate clusters, followed by Hyderabad at 16%. Bengaluru, Ahmedabad and MMR posted the highest sales growth of 15% to 17% yoy during TTM1HFY26, closely followed by NCR. Pune, Chennai and Hyderabad posted negative to 5% yoy growth.  Within the cities, Hyderabad, Pune, and MMR posted strong sales growth with a CAGR exceeding 17% during FY20-FY25. Sales growth in Bengaluru, NCR, Chennai, Ahmedabad, and Kolkata remained below the average five-year CAGR; hence, they may post better than average sales growth in FY27. Given entry-level hiring moderation in IT services and AI-driven efficiency gains, unit absorption in tech-linked corridors could see elongated decision cycles in FY27, despite a healthy end-user intent, with mid-market remaining stickier.

Ind-Ra has also maintained a Stable rating Outlook for its rated tier I real estate entities for FY27. The agency defines tier-I players as those that have positive brand equity, a large scale of operations, high execution capabilities, strong refinancing abilities, and healthy balance sheets. The Stable Outlook for Tier I and non-Tier I players is supported by historical improvements in cash flows and reduced leverage. Tier I players benefit from strong sales and brand recognition, while non-Tier I players (’IND A’ & below) are showing a stable operational performance. Tier I developers are expected to maintain healthy financial positions, supported by steady sales and adequate liquidity.

“We expect the favourable demand-supply equation, robust balance sheets, and liquidity buffer to enable our rated Tier I portfolio issuers to sustain the likely consolidation phase. However, the non-Tier I portfolio may face some liquidity pressure,” adds Harshil Mehta, Senior Analyst, Corporate Ratings, Ind-Ra.