Residential Real Estate In India Loses Steam As Demand Softens In Q1 2026, Says Report

India’s residential real estate market entered 2026 in a phase of moderation, marking a clear shift from the strong momentum seen a year earlier. A comparison between Q1 2025 and Q1 2026 shows that the market is no longer expanding uniformly; demand is softening, supply is still elevated and inventory pressure are beginning to build, according to a recent report by Knight Frank.

“Indian Real Estate market in Q1 2026 reflects a nuanced divergence across asset classes, shaped by both cyclical adjustments and structural strengths. While the office market has demonstrated resilience and achieved a new peak in leasing activity, the residential market has entered a phase of moderation that warrants closer attention,” said Shishir Baijal, chairman and managing director, Knight Frank India.

What The Sales Numbers Say

Sales activity, the most direct indicator of demand, declined on a year-on-year (y-o-y) basis. Total residential sales stood at 84,827 units in Q1 2026, a 4 per cent drop compared to Q1 2025. This moderation was broad-based, but uneven across cities. Mumbai recorded a 7 per cent decline, while Delhi-National Capital Region (Delhi-NCR) and Pune saw sharper corrections of 11 per cent each. In contrast, southern markets showed relative resilience; Chennai grew by 9 per cent and Bengaluru by 5 per cent, indicating that end-user demand remained intact in select micro-markets.

The Supply Trend

On the supply side, the trend was more nuanced. Residential launches in Q1 2026 totalled 94,855 units, registering a marginal 2 per cent annual decline. However, despite this moderation, launches continued to exceed sales for the 14th consecutive quarter. The gap between supply and absorption widened to over 10,000 units, the highest since Q1 2023, signalling that developers are still adding inventory faster than the market can absorb it.

City-Wise Trends

Delhi-NCR saw the steepest decline in launches at 8 per cent, followed by Hyderabad and Kolkata at 6 per cent each. Pune and Mumbai saw relatively mild declines of 5 per cent and 1 per cent, respectively.

Meanwhile, Bengaluru, Chennai and Ahmedabad bucked the trend with increased launch activity, aligning with their relatively stronger sales performance. This suggested a growing regional fragmentation where supply was increasingly chasing pockets of resilient demand rather than broad-based expansion, the report said.

According to the report, a critical outcome of this imbalance between supply and demand was the steady rise in unsold inventory. Total unsold stock increased by 3 per cent y-o-y to approximately 519,846 units in Q1 2026. More importantly, the build-up was concentrated in higher ticket-size segments (above Rs 1 crore), where inventory rose sharply, including a 46 per cent increase in the Rs 2 crore - 5 crore category. In contrast, inventory in affordable segments (below Rs 1 crore) declined, reflecting both lower supply additions and weakened demand in these categories.

The Quarters-to-Sell (QTS) metric also rose from 5.90 quarters in Q1 2025 to 6.0 quarters in Q1 2026. While the increase appears marginal, it underscores a gradual deterioration in absorption efficiency as sales slow and inventory accumulates, the report said.