Real estate growth phase started in 2025, strong momentum to continue in 2026: Report

India’s real estate sector entered a decisive new phase in 2025, transitioning from a post-pandemic recovery to a period of structural transformation, according to Knight Frank India’s latest annual report. The year stood out for the strength of fundamentals across residential, office, retail and emerging asset classes, driven by policy stability, economic momentum and rising end-user confidence.

One of the most striking trends highlighted in the report is the dominance of premium and luxury housing. Homes priced above ₹1 crore accounted for more than half of residential sales across major cities, signalling a sharp shift in buyer profile. Financially stable end-users have replaced speculative investors as the primary demand drivers, enabling the market to absorb higher prices. Key metros such as Bengaluru, Hyderabad, Chennai and Delhi NCR recorded double-digit price appreciation, reflecting both limited supply of quality projects and strong buyer conviction.

Commenting on the sector’s evolution, Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India, said the progress in 2025 underscored the sector’s long-term strength. He noted that the current phase represents “not just a cyclical upswing, but a structural realignment built on genuine demand, better governance, maturing capital, and a deepening trust in India’s long-term economic trajectory,” adding that India is on track to become a USD 1 trillion real estate economy by the end of the decade.

Developers have responded to these changing dynamics by increasingly focusing on premium projects that emphasise brand credibility, sustainability, privacy and digital integration.

Affordarble housing

In contrast, the affordable housing segment remains under pressure due to rising construction costs and limited access to financing, highlighting the need for targeted policy support. Meanwhile, Tier-2 and Tier-3 cities continued to gain market share, supported by infrastructure upgrades, higher household incomes and proactive state-level reforms—marking one of the most significant structural shifts in recent years.

The office market also staged a strong comeback in 2025. Despite global economic uncertainties, demand from multinational corporations, technology firms and global capability centres (GCCs) remained resilient. Gross office absorption is expected to cross 80 million sq ft during the year, reinforcing India’s position as a global talent and enterprise hub. Flexible workspaces recorded record expansion as hybrid work stabilised, with operators expanding into managed offices and sector-specific innovation hubs.

Beyond residential and offices, retail, logistics, warehousing and data centres emerged as core investment segments. Retail assets rebounded as malls and high streets pivoted to experiential formats, while institutional capital flowed into logistics, warehousing and data centres, driven by e-commerce growth, manufacturing reforms and rapid digitalisation.

Looking ahead to 2026, Knight Frank expects momentum to continue in premium housing and commercial real estate, while stressing that affordability challenges and trust in governance and execution will define the sector’s next phase.