India’s real estate sector is witnessing a renewed surge in capital and activity, driven by institutional investments and strong demand across commercial assets. Yet, this growth is not evenly distributed across segments, raising concerns about who is truly benefiting from the current cycle.
Recent industry findings suggest a clear divergence: while capital inflows and premium housing demand continue to strengthen, affordable housing is losing ground. The shift in investment patterns, coupled with rising costs and evolving buyer behaviour, is reshaping the sector into a more selective, and potentially less inclusive, market.
Who Benefits From Investment Boom?
According to the Infomerics real estate outlook, institutional investments in India’s real estate sector rose to USD 8.5 billion in 2025, while housing sales volumes across major cities declined by 12-14 per cent, highlighting a disconnect between capital inflows and end-user demand.
Vishal Raheja, Founder and MD of InvestoXpert Advisors, says, “The surge to USD 8.5 billion hasn’t proportionately improved housing access, especially for first-time buyers. Nearly 65-70 per cent of new launches in 2025 were skewed toward mid-income and premium segments.”
He adds, “Rising land costs and construction inflation have pushed developers toward higher-margin projects, so capital is circulating within investor-driven segments with limited trickle-down to end-users.”
Is Affordable Housing Losing Ground?
Data shows a structural shift in the housing market, with homes priced above Rs 1 crore accounting for around 62 - 63 per cent of total residential sales, while the share of affordable housing has declined to nearly 17 per cent in 2025.
The shift reflects a move toward higher-margin segments as cost pressures reshape developer priorities. In this context, Amit Goenka, Chairman and MD of Nisus Finance, says, “While inflows have risen, the benefits haven’t fully translated into improved access for first-time buyers, with capital largely flowing into mid-income and premium housing segments.”
He adds that elevated land and construction costs are limiting pricing flexibility and project viability. As margins shrink in entry-level housing, developers are shifting focus to premium segments, resulting in constrained supply despite steady underlying demand.
Are Offices Crowding Out Housing?
According to the report, Commercial real estate witnessed robust capital inflows, with office investments reaching around USD 4.5 billion in 2025, while net absorption rose to nearly 61.4 million sq ft, up 25 per cent year-on-year, driven by strong GCC-led demand and sustained occupier expansion.
“Strong leasing demand from GCCs, resilience of Grade A assets, and REIT maturity have made office spaces a preferred choice for institutional capital, offering stability and predictable returns in an uncertain global environment,” says Ashish Narain Agarwal, Founder and MD of PropertyPistol.
He adds that this trend reflects a clear investor preference for long-term visibility and income stability. Rather than displacing residential demand, capital is currently aligning with segments offering stronger certainty, with expectations of more balanced allocation as housing demand stabilises.
Is Capital Shift A Risk?
The report highlights that domestic institutional investments rose to USD 4.8 billion, accounting for 57 per cent of total inflows, while foreign investments declined to around USD 3.7 billion, signalling a shift in capital mix amid global uncertainty.
“Domestic investments reflect stronger local conviction and growing institutional maturity in India’s real estate sector, with Indian institutions increasingly anchoring deal flow even as global investors adopt a more calibrated approach,” says Goenka.
However, Raheja cautions that “domestic capital is often shorter-term and more return-sensitive, and while it is stepping in actively, sustained foreign participation remains critical for long-gestation assets and deeper liquidity in the market,” warning that prolonged moderation in global inflows could tighten funding conditions.
Are Buyers Being Priced Out?
Affordability pressures remain a key concern, with housing prices rising at around 9.3 per cent CAGR, compared to 5.4 per cent growth in incomes, widening the gap and pushing ownership further out of reach for many buyers.
“While overall demand remains intact at the top end, affordability constraints are clearly impacting middle-income buyers, with rising costs and interest rates limiting purchasing ability and slowing traction in the affordable segment,” says Raheja.
However, Agarwal strikes a more optimistic note, saying, “this is not a structural gap but a phase of realignment, where demand is becoming more need-based and value-driven, with buyers prioritising financial prudence over speculative decisions.” |
