India’s real estate market in ‘cautious recovery’ mode; ₹1 crore homes drive growth in Q2 2025

The real estate sector saw 'cautious recovery’ in Q2 2025, with ₹1 crore-plus homes outperforming. South India led sentiment, a Knight Frank-NAREDCO report said

Real estate developers and financial institutions remain optimistic about growth in India’s property market over the next six months, despite ongoing global uncertainties. According to the Knight Frank-NAREDCO Real Estate Sentiment Index, the sector displayed signs of a 'cautious recovery' in Q2 2025. The ₹1 crore-plus housing segment continues to outperform, driven by strong demand in select micro-markets. Developers are increasingly tailoring new launches to align with evolving lifestyle preferences and patterns of urban expansion.

Despite global uncertainties, real estate developers and financial institutions remain optimistic about India’s property market growth over the next six months, the Knight Frank-NAREDCO report said. (Representational photo) (Pixabay)

Geographically, South India emerged as the most confident region, registering a Future Sentiment Score of 63. Key cities such as Bengaluru, Hyderabad, and Chennai led this momentum, supported by robust office space absorption and active developer participation in both plotted developments and apartment projects.

The Current Sentiment Score rose modestly to 56 in the April-June quarter, from 54 in the preceding January-March period, ending a four-quarter downward streak. The Future Sentiment Score climbed to 61 in April-June, from 56 a quarter ago. A score of 50 indicates a neutral outlook; scores above 50 reflect positive sentiment, while those below 50 suggest a negative outlook.

The report also pointed to renewed optimism in the housing market, especially in the premium segment, spurred by falling interest rates, record GST collections, and strong demand momentum.

Premium homes continue to attract buyers

The Q2 2025 Sentiment Index showed that around 70% of stakeholders expect residential launches to remain steady or increase in the coming months.

"The ₹1 crore-plus segment continues to outperform, with developers focusing on high-demand micro-markets and tailoring new launches to meet specific lifestyle needs and urban growth patterns. In contrast, launches in the mid- and low-income segments remain limited due to affordability constraints and shrinking margins, despite financing incentives," the report said

The sentiment on pricing remained stable, with 94% of stakeholders anticipating stable or rising residential prices, consistent with last quarter’s outlook. Cities like Bengaluru, NCR, and Chennai have reported double-digit year-on-year price growth in H1 2025, driven by limited fresh supply and strong demand for branded homes with lifestyle amenities.

The report pointed out that sales expectations have also strengthened modestly. In Q2 2025, 52% of respondents expect residential sales to remain stable or improve over the next six months, slightly higher than the 50% recorded in Q1.

Developers are more optimistic than before, the report said

One of the key highlights of the report is the surge in optimism among developers. "The sentiment among developers has seen a sharp increase, with their Future Sentiment Score rising from 53 in Q1 to 63 in Q2 2025. This change is largely attributable to easing financing conditions, falling borrowing costs following a 100-BPS cumulative repo rate cut by the Reserve Bank of India in H1 2025, and a visible pick-up in high-ticket residential demand," the report said.

The non-developer stakeholders, which include banks, NBFCs, and private equity funds, have also reported a positive sentiment this quarter. Their score improved from 57 to 60 in Q2 2025, reflecting greater comfort with the quality of inventory being developed and a growing alignment between funding institutions and developers in terms of strategic market focus, it noted.

South India leads regional sentiment

The report said that geographically, South India, home to high-growth residential markets such as Bengaluru, Hyderabad, and Chennai, emerged as the most confident region with a Future Sentiment Score of 63, supported by office absorption and strong developer activity in both plotted and apartment segments.

"The north zone, which had hit a post-COVID low of 48 in Q1 2025, recovered to a score of 55 in Q2 2025, supported by improving infrastructure connectivity, a resurgence in demand in Delhi-NCR, and a shift in developer focus toward premium inventory. The West zone saw an increase from 58 to 61, underpinned by continued strength in markets like Mumbai and Pune, which are seeing a consolidation of residential supply and sustained demand for office space," the report said.

Meanwhile, the East zone held steady at 61, with Kolkata’s residential segment showing consistent mid-market activity and buyer confidence.