India's housing market shifts to premiumisation, price growth to cool

India's housing market is shifting to a price-driven premiumisation phase, with sales value growth (17% YoY) outpacing volume growth (6% YoY). A Nuvama report notes southern cities are leading, but weak volumes may persist on affordability concerns.

India's housing market is shifting from a volume-led growth cycle to a price-driven premiumisation phase, with a moderation in housing price growth expected in CY26, says Nuvama.

Sales Value Surges While Volumes Lag

According to the report, housing sales value in May 2026 rose 17 per cent YoY and 2 per cent MoM, with southern cities recording the strongest annual growth, while sales volumes grew 6 per cent YoY.

On a YTD CY26 basis, "housing demand by value surged 13 per cent YoY, led by Bengaluru (+39% YoY) and Chennai (+26% YoY). Absorption in Kolkata and the MMR increased 11-13% YoY, while other major cities posted growth of 4-8% YoY."

New Launches See a Decline

Meanwhile, "Launches by value declined 18% YoY/12% MoM in May-26, falling across all cities, except Hyderabad," the report noted.

Furthermore, "launches fell 14 per cent YoY/MoM in May-26 at the pan-India level (top seven cities)" by volume.

Premiumisation Trend Fuels Price Growth

At the same time, homebuyers are increasingly purchasing higher-priced homes, even though the number of homes being sold is growing at a much slower pace.

It added, "premiumisation trend is still playing out in the industry, which is evident from the fact that a rise in sales value in May-26 (up 17% YoY) is higher than the 6% YoY rise in sales by volumes across the top seven cities."

According to the report, premium/luxury housing demand continues to support price growth across major markets. "Average prices rose 18-19% YoY each in the NCR and Chennai in May-26 followed by ~11% YoY expansion in Bengaluru," it added.

At the same time, "Increase in average prices and unit sizes have led to a surge in ticket size across geographies."

Market Outlook: Structural Concerns and Affordability Issues

Nuvama believes structural concerns around weak housing volume growth are unlikely to ease meaningfully, given deteriorating affordability, limited supply of mid-income homes, and subdued job creation amid tariff-related uncertainties and a K-shaped economic recovery.

As per Nuvama, "housing volumes would remain soft until developers: i) reduce focus on luxury segment and reorient towards mid-income/premium segment and ii) focus on improving affordability by keeping prices/ticket size restricted."

As per Nuvama, "unless developers take a concerted decision to target the mid-income segment, housing volumes shall remain sluggish in the near term."

Adding to this, the report "forecast a moderation in increasing housing prices in CY26," stressing "price appreciation will be in mid-single digit at best."

(ANI)

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