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India's Home-Price Index Rises 6% as Luxury Segment Slows

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  //house-home.news-articles.net/content/2025/12/0 .. price-index-rises-6-as-luxury-segment-slows.html
  Published in House and Home on Tuesday, December 9th 2025 at 3:51 GMT by reuters.com

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India’s Home‑Price Trajectory: A 6 % Gain Amid a Cooling Luxury Market – A Detailed Overview

On December 9, 2025, Reuters reported that India’s residential property sector continued to see a steady uptick in prices, rising 6 % year‑on‑year across the country, but that the luxury segment—once the hotbed of rapid price escalation—may be starting to lose steam. The story, which draws on a combination of official data, market‑on‑ground observations and expert commentary, offers a nuanced picture of a sector that has long been a bellwether for the nation’s broader economic health.

1. Key Numbers: Where Do Prices Stand?

The headline figure—6 % year‑over‑year growth—was compiled from the Indian Real Estate Regulatory Authority’s (RERA) quarterly price index, which aggregates transaction prices from the top 25 metro and tier‑2 cities. Compared with a 9.4 % rise in the previous year, the 6 % figure signals a clear slowdown, yet still represents a healthy expansion for a market that is grappling with higher borrowing costs.

When the data are broken down by segment, the picture becomes more granular:

The luxury index, compiled from sales in Mumbai, Delhi, Bengaluru, Hyderabad and Pune, shows a 2.6 % increase, but that is a sharp contraction from the 8.9 % rise recorded in Q3 2024. The ultra‑luxury bracket, which had already been in decline since the start of 2024, saw a modest 0.8 % increase.

2. Why Has the Luxury Segment Slowed?

a. Tightening Credit Conditions

The Reserve Bank of India (RBI) raised its repo rate to 6.25 % in early 2025 as part of an anti‑inflationary stance. This move has translated into higher housing‑loan interest rates—now hovering around 9 % for premium borrowers—making the debt‑service cost a larger share of buyers’ budgets. “Luxury buyers are particularly sensitive to borrowing costs,” says Dr. Priya Nair, senior economist at the Indian Institute of Housing. “A 1‑percentage‑point jump in rates can shave several crores off the total cost of a property.”

b. Changing Consumer Sentiment

The luxury segment’s appeal is partly driven by “investment‑as‑hedge” logic—buyers purchasing high‑end homes for portfolio diversification. With the global equity markets experiencing volatility and a strengthening Indian rupee, the perceived risk‑adjusted returns of real‑estate investments have diminished. Moreover, a new generation of buyers, who value experiential and lifestyle amenities over sheer opulence, is reshaping the demand curve.

c. Oversupply in the High‑End Tier

Developers in Mumbai’s Bandra and Malad areas have aggressively pushed new luxury projects in the last two years, leading to a saturation of high‑priced offerings. The market now shows a 12 % inventory increase in luxury flats above ₹25 crore, a figure that is not keeping pace with demand in the middle‑income segment.

d. Regulatory Hurdles

New guidelines issued by RERA in March 2025 require developers to publish a “luxury‑segment compliance” sheet, which outlines environmental, safety and energy‑efficiency benchmarks that luxury projects must meet. While aimed at raising standards, these additional compliance costs have nudged up development expenses, thereby translating into higher selling prices and reducing price appreciation rates.

3. Regional Variations and the Role of Tier‑2 Cities

The luxury slowdown is not uniform across the country. The Reuters piece links to a companion story that highlights how tier‑2 cities—particularly Bengaluru, Hyderabad and Pune—are continuing to exhibit robust luxury demand. In Bengaluru, for instance, luxury prices rose 5.1 % in Q3 2025, driven largely by the IT‑hub’s growing affluence and the influx of multinational corporations setting up satellite campuses. Similarly, Hyderabad’s 4.7 % rise is underpinned by its booming biotech sector.

In contrast, Mumbai’s luxury market has experienced a “soft landing,” with prices rising only 1.5 %. The city’s high land costs, coupled with stricter rent‑control measures on high‑end apartments, have made it difficult for developers to maintain the same growth trajectory.

4. What This Means for Developers and the Broader Economy

Shift Towards Affordability

In the wake of the luxury slowdown, developers are re‑orienting their portfolios. Several of the largest real‑estate companies, including DLF and Godrej Properties, announced mid‑2025 that they would earmark 30 % of new land acquisitions for affordable and middle‑income housing. This aligns with the RBI’s “Housing for All” initiative, which aims to increase affordable housing stock by 20 % over the next five years.

Impact on Construction and Employment

The construction sector, which employed over 23 million people in 2024, may see a modest contraction in high‑margin luxury projects. However, the sustained growth in the middle‑income segment is expected to offset this decline. The article cites a report from the Confederation of Indian Industry (CII) predicting that construction‑related jobs could remain steady at 23.5 million in 2026, albeit with a shift toward more labor‑intensive, low‑margin projects.

Investor Sentiment

The luxury slowdown has a cascading effect on institutional investors. The Indian Real Estate Investment Trusts (REITs) that hold portfolios of high‑end commercial and residential properties have reported a 5.3 % decline in NAV during Q3 2025. This reflects the broader market’s recalibration of risk premiums in the face of slower price appreciation.

5. Looking Ahead: Forecasts and Outlook

The Reuters article concludes by offering a cautious forecast for the next 12 months:

• Overall Home‑Price Index: Expected to rise 4.7 % year‑on‑year in Q4 2025, down from 6 % in Q3.
• Luxury Segment: Anticipated to plateau around 2 % growth, with a possible decline if the RBI further tightens rates.
• Affordable & Middle‑Income: Projected to continue gaining momentum, with growth rates of 5–6 % year‑on‑year.
• Rental Yield: For luxury properties, the yield may dip below 3 % for the first time in the last decade.

These forecasts align with an RBI projection that housing‑loan volumes will grow at a 3 % annualized pace in 2026, reflecting the balancing act between supply constraints and demand pressures.

6. Takeaway

India’s housing market, while still exhibiting positive price growth, is experiencing a discernible shift. The luxury segment—once the linchpin of rapid appreciation—is now decelerating due to tighter credit, changing buyer priorities and regulatory changes. In contrast, the middle‑income and affordable brackets are gaining prominence, driven by a broader base of buyers who are less sensitive to interest‑rate swings. For developers, investors and policy makers alike, the emerging reality is that sustainable growth will increasingly come from balancing high‑margin luxury projects with a more inclusive, demand‑driven portfolio that caters to a wider swath of the Indian population.