India Real Estate 2025: The Calm Before the Climb reveals that residential and commercial property sales inched up marginally in Q3 2025 to match pre-COVID highs.
India’s real estate sector has remained harrowed for the last six years. The disruptions in the sector caused by the introduction of RERA and GST were exacerbated by an NBFC crisis in 2019. This was followed by a pandemic in 2020. Now, in 2025, tariffs, global turmoil-triggered cost hikes, and capital exits loom large. Yet, a stronger India growth story is reversing a slowdown being experienced currently across real estate markets globally.
The recently released Q3, 2025 India Real Estate – Residential and Office report of UK-headquartered real estate advisors Knight Frank indicates a marginal hit in activity but certainly does not say that the sector is down and out. In fact, experts see hopes of Indian real estate surpassing the highs of the pre-COVID era once a moderation in real estate activity is achieved during the year.
Residential Segment
“India’s residential market in Q3 2025 has demonstrated an impressive ability to sustain momentum, and the market is now in its fifth year of an upcycle. Consequently, y-o-y growth rate is beginning to rationalise, and we may be entering a prolonged plateau phase,” said Shishir Baijal, chairman & managing director at Knight Frank India during the recent media briefing for the Q3 report.
Here’s how India real estate activities and the underlying hope in its resilience panned out through the third quarter, in the context of the last known heights of pre-COVID times.
During Q3 2025 residential housing registered a decline of 2% in project launches but clocked a 1% uptick in sales year-on-year (y-o-y), according to the report. Back in 2019, Knight Frank India noted pre-covid (H2, 2019) housing sales were down 1% on a y-o-y basis.
Project launches, however, were up by 23% in 2019, signalling the robust sentiment for the housing sector before the pandemic spread. But if 2019 was about policy oxygen, 2025 is about market muscle. Over these six years, a once subsidy-propped booming market has matured to become one anchored in discipline and global confidence.
During 2019, a modest rebound of real estate activities was driven by government subsidies under PMAY, boosted affordable housing, rate cuts on under-construction homes by the GST Council, and repo rate cuts to revive demand. Developers still leaned on non-bank financiers — NBFCs funded over half of residential projects — and the affordable segment made up 51-52% of all launches.
By 2025, much of this had changed. Developers have cut leverage by 35%, institutional capital has replaced NBFC loans, and private equity inflows in India real estate sector have crossed $5.5 billion in FY24, a 70% rise since 2019. RERA has made defaults harder, but credibility stronger. For buyers, a waiver of stamp duties, easing of GST rates, and repo rate cuts have translated to higher liquidity.
Unsold inventories, however, continued to rise as they have since 2020. “Developers are interested in the higher-end Rs 1 cr and above segment as they seek better valuation for their investments naturally,” said Zia. Unsold inventory in the Rs 1-2 cr segment rose 17% y-o-y during the quarter.
The report states that inventory levels in the higher ticket sizes, particularly those in the Rs 2-5 cr and Rs 20-50 cr categories, have grown by 47% and 19% y-o-y, respectively, and warrant a closer look in terms of an assessment of whether the market is overheating.
Affordable vs Luxe
The affordable segment market share dropped to 48% of total sales in Q3 compared to 54% in the previous one. It commanded 52% market share in 2019. And for the first time since Q4 2022, affordable housing (under Rs 50 lakhs & Rs 50 lakh-1 cr) took the back seat and luxury housing dominated the market. The Kolkata market remained an outlier and the only market where affordable housing sale activities saw an uptick, the Q3 report notes.
Sales were up 17% for the above Rs 50 lakhs to Rs 1 cr priced units. Ultra luxe residential units priced at Rs 5-10 cr, Rs 10-20 cr, and Rs 20-50 cr witnessed higher sales by 33%, 170% and 34% respectively. However impressive these growth numbers are, these high-end residential units still comprise only a thin section of the market, amounting to about 1,500 units, the report notes.
“Premium housing has decisively taken centre stage, accounting for more than half of all sales this quarter. The strength of the Rs 1–2 cr segment, now the largest by volume, underscores a structural shift in buyer demand,” said Gulam Zia, senior executive director – Valuation, Advisory and Research, Knight Frank India at the media briefing. He termed the stable absorption levels as reaffirming the market’s ability to adjust and grow within a healthy and sustainable framework.
It seems that developers have moved up the value chain, and buyers have followed. The affordable boom that drove 2019 has now matured into a premium middle-class market — one that is aspirational, cautious, and better financed, he opined.
Office Segment
In the office space segment, sales dropped 6% y-o-y during Q3 (at 17.8 million sft). Grade A offices comprised 88% of the transaction volume during the quarter. New opportunities driven by India-facing businesses, REITs, Global Capability Centres (GCC), third-party IT services given wide AI adoption globally, and a preference for flex workspaces have all opened up opportunities. As a result, India’s office space transactions surpassed a billion square feet during the quarter.
GCCs alone accounted for 32% of the net sales during the period, flex-workspaces comprised 18% and third-party IT services 12% of all office space sales. Bengaluru, Mumbai, and Delhi remained the most coveted markets for office spaces, though rentals went up between 1-14% in all nine markets tracked by the report. Back in 2019, though this segment had seen unit sales jump 27%, new project launches were up by 56% and average rentals fell by 1% y-o-y.
Rentals of office spaces this time, though, have grown across all nine markets monitored by the report and witnessed double-digit y-o-y growth in Kolkata (up 14%) and Mumbai (11%). “India remains a significant global office market, offering value and cost advantages to international occupiers, underscoring the sector’s resilience and strong positioning for long-term growth. While 2025 is expected to close at a new high ~85 million sft, office leasing activity will need to be monitored closely in the coming years.”
Global Capability Centres (GCCs) — from JPMorgan to Apple — now account for 40% of demand. This indicates that the commercial real estate sector has steadied. Leasing volumes are slightly lower — down 6% y-o-y, at around 15 million sft in Q3 — but still place India among the top three office markets in Asia as vacancy rates tighten, and rental yields trend upwards.
In 2019, office leasing volumes had touched a record 26 million sft in six months — up 26% y-o-y — led by IT services, co-working operators, and back-office expansions. It was a market powered by cost advantage and economic optimism, but one still reliant on domestic occupiers and short-term policy buoyancy.
Compared to then, in 2025, vacancy rates have tightened, and rental yields are trending upward. The momentum in the office space segment that was noticed six years back has, over time, matured into structure. The market isn’t slowing — it’s strengthening at the core. And after a decade of reform and recovery, that steadiness might just be its most sustainable growth story yet.
“The market appears to be on firmer footing, and with the festive season underway, we’re optimistic that activity will pick up further,” said Zia, affirming that 2025 could still turn out to be the best year for India’s real estate sector since the pre-COVID times.
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