India's residential market to dominate 70% of real estate by 2026; here's what's driving it

India’s real estate sector, comprising residential, commercial, retail, hospitality, and SEZ spaces, is witnessing strong demand, with the residential space alone expected to account for 70% of the market by 2026, with 10 million new homes, according to the latest report by investment firm Equirus Capital. There has been a strong momentum in the residential sector, with Q1 CY25 sales hitting 93,280 units, backed by established developers, a stable economy, and positive buyer sentiment.

In the commercial space, the leasing volume hit 20.3 mn. sq. ft. in Q1 2025, a 5% YoY growth, with the overall commercial market projected to grow at a 19.8% CAGR, reaching $253 billion by 2033. In the retail space, FDI in multi-brand retail is seen boosting demand, with leasing hitting a 5-year high of 3.1 MSF (H1 2024). The report says the top 7 cities have added 9 million sq. ft. of retail in 2025 (vs. 8.7M in 2023).

In the hospitality space, occupancies are set to rise at a 3.5-4% CAGR, with around 12,000 rooms added in 2023 and an additional 15,000–16,000 rooms set to be added by 2025. In terms of investment, the data shows post-COVID (2020–23), investor interest has surged, with US$400 million+ invested, and plans for US$2.3 billion more. Across SEZs, too, India has seen significant growth, with the Dec 2023 rule amendment enabling partial denotification and unlocking 15–18 million sq. ft. for IT/ITeS.

India’s tier-1 cities recorded housing sales worth ₹3.6 lakh crore in H1 2025, a 9% increase from last year, despite a 4% dip in units sold, as per the CREDAI-CRE Matrix report. The rise was driven by a 14% jump in average ticket size to ₹1.42 crore, reflecting a strong shift toward premium housing.

NCR led with a 26% revenue share, boosted by luxury homes above ₹3 crore forming 73% of its sales value. MMR followed with a 23% share, supported by rising ultra-premium demand. Southern markets like Chennai (+23%) and Bengaluru (+4%) also showed value growth, while Pune struggled with declines. Ahmedabad and Kolkata displayed strong momentum, with the latter’s luxury segment doubling its share. The trend highlights homebuyers’ preference for premium, well-located properties.

In the second quarter, India’s real estate mood brightened, with the Sentiment Index surging to 56 (from 54), ending a four-quarter slide, while Future Sentiment jumped to 61 (56). Developer confidence also surged (Future Sentiment 53→63) on easier financing and a cumulative 100 bps RBI repo cut, alongside robust demand in premium housing and steady office leasing by GCCs and flex operators. Besides, pricing expectations remained firm as 94% foresee stable or higher prices.