India’s residential real estate sector is set to maintain strong momentum, with bookings expected to grow 10–12% year-on-year in FY26, driven by premium and luxury housing demand, according to India Ratings and Research (Ind-Ra). However, despite robust pre-sales across Tier-1 developers, collection efficiency has weakened amid execution delays, rising competition and a higher mix of upper-end launches.

Tier -1 peer-set (a sample set of 11 listed entities) witnessed 21% yoy growth in 1HFY26 sales volumes, with blended realisations rising 12% yoy. Tier – 1 players continued to benefit from sector consolidation due to brand recall and ability to maintain a large number of launches. The booking growth was supported by individual project launches, sustained growth momentum across the top eight cities more prominently in National Capital Region, Mumbai Metropolitan Region. and Bengaluru. This is despite some players facing approval delays on new housing starts and handovers.

“The FY26 performance is likely to exceed our original expectation of tepid growth, reflecting the impact of a high base effect. An improved product mix and demand for the premium (>INR20 million to INR70 million) and luxury segments (>INR70 million) seem to have supported the growth in booking value. Execution cycle seems affected by approval delays, as seen in falling collection efficiency. The mid-premium and premium segments are likely to remain more resilient than affordable segments. The aspiration of upper-middle income households for larger space, multi-family amenity based high rises is likely drive the sector growth in the band of 1x to 1.5x of the nominal GDP growth rate in the medium term”, says Mahaveer Shankarlal Jain, Director, Corporate Ratings, Ind-Ra.

The pre-sales value of the peer-set grew strongly at 33% yoy in 1HFY26. The cohesion of growth trend in individual companies observed in FY24 is now dispersing with a few shifts to negative zone. This is also supported by strong growth of over 50% yoy by four of the 11 developers in the peer-set, with another four of them reporting a dip in pre-sales, as sales were primarily driven by the upper end of the pricing segment.

Pre-sales volumes (million square feet) of peer-set improved to 21% yoy in 1HFY26, supported by three of the players posting over 40% yoy growth. This increase in volume is despite rising housing prices and subdued launches. Of the top 11 developers, four reported a dip in pre-sales volumes, indicating either a weak demand or delays in launches. Demand in terms of number of units has been anaemic, however it has improved in million square feet, indicating a higher mix of upper-end segments. The strategic land bank acquired over past few years is likely to ensure adequate supply. Moreover, given the regulatory overhang on environment clearances has seemingly been addressed, Ind-Ra expects the launch momentum to pick-up in 2HFY26.

Average realisations improved in 1HFY26, given a higher mix of premium and luxury segment sales. Peer-set realisations rose 11% yoy in 1HFY26. The average realisations are arrived at by dividing aggregate pre-sales in value by volume in square feet; however, the median change in price realisations at project level could have been a better metric to measure the price increase. As per Liases Foras data, the yoy price rise on average in 1HFY26 was stronger for NCR, Chennai, Bengaluru, MMR, and Kolkata. While prices remained subdued in Pune, and Hyderabad. The impact of rising competition, leading to cost inflation amid elongated execution cycle, is likely to negate the benefits of higher mix of upper-end unit sales on operating margins. 

The peer-set aggregate collections grew 17% yoy in 1HFY26. Only one developer in the peer-set reported a yoy dip, in contrast to 4QFY25 when three of them reported a decline. Collection efficiency (collections to pre-sales ratio) dropped to 63% yoy in 1HFY26 (March 2025: 73%), indicating slower deliveries and possible subvention sales and execution challenges. Ind-Ra relies on collection efficiency ratio to measure project execution progress, the mix of projects at various stages of development cycle, and subvention sales.

The peer-set gross debt levels were up 4.7% yoy to INR518 billion in 1HFY26 (March 2025: INR503.5 billion). Ind-Ra measures leverage intensity using the gross debt to pre-sales ratio and the gross debt collection ratio, which have marginally decreased. Leverage remained at comfortable levels for the peer-set, despite the fall in collection efficiency, with borrowing levels marginally inching. Ind-Ra expects leverage levels to remain comfortable in the near term, supported by strong growth in new launches in 2HFY26, business development partly funded by equity, and sustained growth momentum in pre-sales, despite subdued collection efficiency.

Ind-Ra-rated residential real estate portfolio rating actions in 1HFY26 were largely affirmations, supported by in line credit metrics and liquidity buffers, despite underperformance in collections due to delayed launches. The agency’s sector outlook neutral, with expectations of improved pre-sales growth and new home starts in 2HFY26. Balance sheet debt is expected to remain stable, supported by an improved execution cycle.