Luxury Housing Gains Traction As Developers Prioritise Profit Over Scale

The Indian real estate market is at a crossroads when it comes to its residential segment. As per the Knight Frank-NAREDCO Real Estate Sentiment Index for Q3 2025, the market is stable yet selective. Developers are shifting their focus from mid-income housing to high-ticket homes. This transition comes as affordable pressure continues to weigh on the mid-segment audience. Premium housing benefits raise the incomes of investors and prospective buyers.

The market sentiment remains optimistic overall, with the Current Sentiment Score rising to 59 from 56 in the previous quarter, whereas the Future Sentiment Score holds steady at 61. The number not only reflects how strong the market is holding on, but also reflects the confidence and faith among stakeholders and buyers. However, developers are approaching the new launches very cautiously, by prioritising profitability over scale.

The survey shows that 71 per cent of developers are expecting residential launches to remain stable or increase slightly. Though their focus remains on high-value projects, with many scaling outside of Tier-I to avoid unsold inventory build-up.

This data highlights the strength of the upcoming premium segments in the residential segments. Residential markets in NCR, Bengaluru, and Hyderabad have seen a price rise of nearly 13 per cent to 19 per cent year-on-year (Y-o-Y) in Q3 of 2025. This surge is backed by affluent buyers and investors who see real estate as a stable asset to own during such global unrest.

In contrast, the mid-segment continues to struggle despite interest rate cuts and subsidiary schemes. For many potential buyers, affordability remains stretched, which pushes them out of the active demand pool.

About 86 per cent of respondents expect stable or improved access to capital. With banks and equity firms showing interest in structured and premium assets. Developers are using this favourable environment to double down on high-margin projects, especially those that align with the urban and modern aspirations.

Key Takeaways From The Report

The report notes how the Indian housing market is becoming polarised due to these new trends.

The affluent classes continue to demand luxury and premium homes. This makes the mid-income buyers face diminishing affordability when it comes to investing in real estate.

Developers are responding well to these trends as they offer them a chance to diversify their portfolios and recalibrate supply strategies.

Housing sector appears to be entering a phase of selective but sustainable growth. This is anchored in mass-market affordability but in aspirational urban living and asset building.