Luxury real estate booms while mid-income housing faces headwinds

The Indian real estate market is witnessing a growing divergence between luxury and mid-income housing segments. While high-end properties continue to see strong demand, the mid-income segment is grappling with supply-side challenges and market saturation in key urban centers.

According to Gulam Zia, Senior Executive Director at Knight Frank India, the luxury real estate sector remains resilient despite recent stagnation in equity markets. “Most of the money flowing into real estate comes from stock market gains, particularly in the mid to high-end and luxury segments. Mumbai and Delhi have seen a surge in transactions of properties valued at ₹100 crore and above,” Zia said.

Mumbai, in particular, has been a hotspot for luxury housing, with over 98,000 apartments sold in 2024 alone. The ultra-premium segment, defined as properties above ₹50 crore, remains strong, with inventory projected to be absorbed within four to five quarters. However, the ₹20-50 crore segment is showing signs of stress, with a significant inventory buildup that could take over five years to clear.

Hyderabad and Bengaluru are also seeing steady demand for luxury properties. “In Hyderabad, inventory levels in the mid to upper-end and luxury segment remain under control, with no more than eight quarters of stock available,” Zia explained.

Mid-Income Housing Faces Plateauing Demand

While luxury real estate thrives, the mid-income segment is showing signs of stress, particularly in the National Capital Region (NCR) and Gurugram. Developers in the region are noting a plateau in demand due to an oversupply of premium projects. “The [Gurugram] market has seen excessive launches in the ₹4-5 crore segment, leading to supply outpacing demand,” said Varun Gupta, Director at Ashiana Housing.

Rajat Kathuria, CEO at Signature Global, echoed similar concerns. “If you focus on housing priced between ₹2-3 crore, demand remains strong. However, as you move up the price ladder, inventory starts to accumulate. Our strategy remains centered on this ₹2-3 crore range, as it continues to witness strong absorption rates.”

Affordable Housing Declining Amid Rising Costs

Despite real estate’s overall growth, affordable housing is experiencing a significant decline. “In 2020, affordable housing accounted for 40% of demand. Today, it is less than 20%,” said Niranjan Hiranandani, Chairman of Hiranandani Group. He attributed this trend to increasing taxation and regulatory costs. “In Mumbai, nearly 50% of a flat’s cost is attributed to government levies, including GST, stamp duty, and additional FSI charges. Rising Ready Reckoner rates further worsen affordability.”

Hiranandani also noted a shift in buyer preference towards larger homes. “Even in Panvel, where we have substantial operations, demand for two- and three-bedroom apartments is far higher than one-bedroom units. The market is mirroring trends seen in the automobile industry, where premium cars are outperforming lower-end models.”

The Future Outlook: Luxury to Stay Strong, Mid-Income Housing Needs Stability

Experts remain optimistic about the luxury market’s long-term growth but caution against excessive supply in certain segments. “Ultra-luxury properties will continue to sell well, but developers need to be cautious with launches in the ₹20-50 crore segment,” Zia warned.

Meanwhile, mid-income housing developers must navigate fluctuating demand and potential downturns. “Real estate is a cyclical business. While demand for mid-income homes remains stable for now, developers must manage inventory wisely to avoid oversupply,” said Gupta.