Across the top seven cities, residential sales fell 6 per cent year-on-year in Q2 2026 to about 90,715 units, while new launches rose 7 per cent to nearly 1.06 lakh units. Available inventory crossed 6.16 lakh units, up 10 per cent annually. Bengaluru’s inventory rose 34 per cent. The issue is increasingly a mismatch between supply, affordability and location.

The puzzle becomes clearer when prices and costs are placed side by side. Between 2021 and 2025, average construction cost for a standard-plus residential project rose 34 per cent, from Rs 2,681 per sq ft to Rs 3,604 per sq ft. Residential capital values, however, jumped 59 per cent, from Rs 5,826 to Rs 9,260 per sq ft. Land values across the top seven cities rose 50-120 per cent between 2021 and H1 2026, according to a report by Business World.

Demand Shift

So, is India’s housing boom losing steam? Not really. It is changing shape. JLL’s Q1 2026 data showed residential sales rising 8 per cent year-on-year to 70,631 units, but the headline concealed sharp premiumisation. Homes above Rs 1 crore recorded 30 per cent growth, while sales below Rs 1 crore contracted 24 per cent.

ANAROCK’s Q2 numbers tell much the same story. Homes priced at Rs 80 lakh-Rs 1.5 crore formed the largest share of fresh supply at 27 per cent, followed by Rs 1.5-2.5 crore at 25 per cent and homes above Rs 2.5 crore at 22 per cent. Affordable supply below Rs 40 lakh accounted for just 6 per cent.

Anuj Puri, Chairman – ANAROCK Group, calls the market “more balanced”, with supply catching up with absorption. He points to premium housing, GCC-led employment hubs and infrastructure-driven corridors as the strongest pockets of growth.

Why does this matter? A market can look healthy in value terms while becoming increasingly uncomfortable for the middle-income buyer. Average ticket sizes rise, but the entry point for ownership moves further away from household incomes.

Land is a major reason, say experts. NCR and Bengaluru saw land price increases of roughly 70-130 per cent and 60-120 per cent respectively between 2021 and H1 2026. Infrastructure is part of the irony: the road, metro or expressway that makes a peripheral location attractive can also make surrounding land more expensive before a single apartment is launched.

Cost Pressure

Is construction inflation the villain? Partly, but cement is not the biggest culprit. The PL Capital cement-sector assessment shows all-India average cement prices at about Rs 330 per bag in August 2026, broadly flat month-on-month. Dealers reported mixed demand and limited confidence in the sustainability of proposed September price increases. For developers, that stability offers some relief, but not enough.

The construction-cost analysis puts cement’s share at 12-18 per cent of project costs, with prices up around 4-5 per cent. Steel accounts for 15-20 per cent and has risen about 20 per cent, while fuel and site logistics are up 15-20 per cent. Labour remains the largest individual component at 25-30 per cent of project cost. MEP costs have also risen sharply and represented nearly 22 per cent of total construction cost in 2025, experts add.

Modern projects are more technically elaborate, with building services and amenities adding to the bill. What happens when costs rise after a project has already been sold? Developers have

limited room to pass them on, so margins get squeezed. New projects have more flexibility to re-price, but only if buyers can absorb the increase. Premium housing can absorb higher costs more easily; affordable housing cannot.

Developers can raise prices, reduce specifications, change the product mix, delay launches or move towards locations with stronger pricing power. None is ideal if the objective is to expand homeownership.

Inventory Question

Are unsold homes now the next big worry? They are worth watching, but the picture is more nuanced than a simple inventory-overhang story, say experts.

ANAROCK’s Q2 data puts available inventory in the top seven cities above 6.16 lakh units, 10 per cent higher than a year earlier. Bengaluru recorded the sharpest increase, from around 58,890 to 79,180 units. NCR, MMR, Bengaluru, Pune and Hyderabad accounted for 90 per cent of Q2 sales.

Knight Frank’s Q1 assessment provides another useful lens. Inventory in homes above Rs 1 crore increased, with the Rs 2-5 crore segment registering a 46 per cent year-on-year rise. The overall quarters-to-sell metric edged from 5.9 to 6.0 quarters. It is a reminder that launches cannot indefinitely outrun absorption.

The uncomfortable part is that inventory is accumulating in segments developers increasingly prefer to build. Premiumisation makes commercial sense, but if everyone follows it, the top end can become crowded while the mass market remains undersupplied.

Puri says “new supply in the top cities dropped by 16 per cent” on a quarterly basis in Q2 2026. Annual launches still rose 7 per cent because large listed developers brought projects from land acquired earlier, but uncertainty encouraged some developers to throttle back launches.

MMR and Bengaluru accounted for 53 per cent of fresh supply. Bengaluru added 21,670 units, up 41 per cent year-on-year, but 96 per cent was in premium and luxury segments. Hyderabad added 16,970 units, up 53 per cent annually, with more than 82 per cent in premium and luxury. NCR launches plunged 40 per cent year-on-year, with 61 per cent of fresh supply above Rs 1.5 crore.

Capital Opportunity

So, where is the opportunity if the mass market is squeezed and premium housing becomes crowded? The answer may lie in better targeting. GCC expansion, manufacturing, infrastructure and urbanisation are creating pockets where incomes support higher housing values.

There is also a larger institutional opportunity. JLL reported Indian real estate investment of $1.7 billion in Q1 2026, up 37 per cent year-on-year. Residential accounted for 28 per cent of investment capital between 2021 and Q1 2026. Developers acquired more than 3,093 acres across 149 transactions in 2025, with potential development of about 229 million sq ft; residential accounted for 78 per cent.

Chanakya Chakravarti, a global real estate investor and Capital Strategist, says “Residential, hospitality and mixed-use assets are also catching investors’ fancy.” Rental housing, mixed-use communities, senior living and professionally managed residential assets could broaden the opportunity. Senior living is particularly interesting. Chakravarti points to estimated demand of 20 lakh-22 lakh senior-living units against only around 25,000 organised units today. India’s elderly population is projected to reach 230 million by 2036. Since 2025, more than Rs 13,000 crore has been announced, potentially adding nearly 75,000 units over three to four years.

“Investors are looking across sectors for stable income and long-term demand,” Chakravarti says.

The Way Forward

What will separate the winners from the rest? First, discipline: developers need to align launches with absorption, say experts. Second, affordability needs to return through smaller configurations, efficient land use, calibrated specifications and products designed around household incomes. Third, consolidation should continue. Higher land and construction costs and the premium on brand trust favour developers with strong balance sheets and delivery records.

Finally, the sector needs to look beyond metro luxury apartments. Tier-2 and 3 cities, rental housing, senior living and mixed-use developments offer healthier long-term equations. Chakravarti notes that 30-40 per cent of new senior-living launches could eventually come from tier 2 and 3 cities.

The outlook remains constructive, but less forgiving. Buyers are selective, developers cautious and investors discriminating. Cement may be stable, but land, steel, labour and building systems keep costs elevated. The next phase of India’s housing story will therefore be less about selling ever-more-expensive homes and more about getting the product, price and location right.

Can India’s developers turn this affordability squeeze into the next housing opportunity? Only time will answer!