Mumbai: India’s real estate sector is projected to remain resilient through 2026, driven by strong demand, healthy developer balance sheets, sustained office leasing, and growth in manufacturing and warehousing. However, prolonged geopolitical uncertainty in West Asia and elevated crude oil prices could drive up construction costs, impacting developer margins and home affordability, according to a report by CareEdge Ratings.
The CareEdge report highlights that the impact of the West Asia crisis remains uneven across various real estate segments. While project execution and affordable housing face mounting cost pressures, office leasing continues to thrive on strong demand from Global Capability Centres (GCCs). Simultaneously, industrial and warehousing segments are benefiting from steady expansion in e-commerce, logistics, and manufacturing.
Residential Sales and Shift to Premium Housing
Residential sales across the top six cities are expected to remain broadly range-bound at around 3.55 lakh units in CY2026. Premium and luxury housing segments are likely to stay resilient, supported by affluent buyers, high-net-worth individuals, and non-resident Indians. Conversely, affordable housing faces potential headwinds from higher inflation, elevated interest rates, and rising construction costs.
The preference for premium housing has strengthened significantly. Homes priced above Rs 1.5 crore represented 53 per cent of new residential launches across the top seven cities in Q1 2026, up from 43 per cent in the same period a year earlier. Consequently, the share of launches for homes priced below Rs 1.5 crore fell from 57 per cent to 47 per cent.
Office Leasing and Institutional Investments
Office real estate remains a major growth driver. Gross office transactions surged to a record 29.9 million square feet in Q1 2026, marking a 6 per cent year-on-year increase, with GCCs contributing 48 per cent of total absorption. CareEdge projects Grade A office absorption across the top six cities to surpass 90 million square feet in CY2026, though persistent global uncertainty could potentially slow expansion choices for multinational corporations.
Institutional investment in the sector showed robust momentum, attracting $3.5-4 billion during H1 2026—the highest first-half inflow recorded since the COVID-19 pandemic. In Q2 alone, investments jumped 90 per cent quarter-on-quarter to reach $2.65 billion.
Additionally, top residential developers have notably strengthened their financial position. The debt-to-collections ratio for leading players dropped to 0.68 times in FY26, down from 1.80 times in FY20. This deleveraging equips larger developers to better navigate rising costs and credit market volatility, whereas smaller, highly leveraged developers remain more exposed to risks.
