Indian real estate sector: Driving forward on a strong growth trajectory

By Adarsh Ranka and Soumya Ranjan

India’s real estate sector continued its strong growth trajectory in 2025, reinforcing its position as a core pillar of the country’s economic expansion. The sector currently contributes nearly 8% to national GDP and has attracted over $80 billion in institutional investments since 2010 and credit exposure now exceeds ₹35 lakh crore (about one fifth of total credit), displaying clear signs of confidence. As India becomes the world’s fourth-largest economy in 2025, real estate is increasingly shaped by digital-first processes, sustainability mandates, strategic capital flows and evolving consumer expectations.

Market performance in 2025: Sales highs, Grade-A office absorption and warehousing boom

India’s post-pandemic economic revival continued to support real estate momentum. In the commercial segment, Grade A/A+ office stock surpassed the 1 billion sq. ft milestone by Q3 2025. Total office transactions reached 62.3 million sq. ft in the first nine months, driven largely by GCCs and IT services, while flexible workspace operators expanded their footprint. ESG-compliant, wellness-focused and technology-enabled offices gained prominence as occupiers prioritised productivity, resilience and long-term sustainability.

On the residential front, launches (2,78,000 units in H1 2025) and sales (2,54,000 units) softened marginally versus H1 2024. However, the sector recorded a 9% increase in overall sales value, driven by premiumisation, demand for larger units and upgraded amenities. Average ticket sizes rose from INR 1.24 crore to INR 1.42 crore, with MMR and NCR jointly contributing nearly half of total market value.

Industrial and warehousing real estate delivered record-breaking performance. Grade A/A+ supply reached 27.9 million sq. ft in H1 2025—a 45% YoY jump—while absorption increased to 33.1 million sq. ft. 3PL and manufacturing firms each accounted for nearly 30% of demand. India is now on track to close 2025 with ~345 million sq. ft of high-quality warehousing stock, supported by logistics modernization, e-commerce scale and manufacturing incentives.
Policy push and digital transformation: A more transparent and efficient ecosystem

Government-led reforms continued to strengthen transparency and efficiency. Key measures included digitised registration systems, single-window construction approvals, unified RERA dashboards and simplified compliance norms. These interventions reduced delays, improved accountability and encouraged wider institutional participation.

Digital transformation accelerated through 5G rollout, e-governance and AI-enabled analytics. Real estate processes increasingly shifted to online discovery tools, e-KYC transactions, blockchain-enabled title validation, automated lease management and smart energy systems. Complementary policy frameworks - such as Gati Shakti, National Logistics Policy and data-centre incentives - supported growth in non-traditional asset classes.

2026 Outlook: Affordability pressures, rentals and new asset classes

As the sector enters 2026, changing consumer behaviour and affordability dynamics will be decisive. Homebuyers increasingly prefer larger layouts, hybrid-work-friendly interiors, EV-ready infrastructure, green buildings and community-led living. Suburban and peripheral markets will remain attractive due to better connectivity and competitive pricing.

Affordability challenges may intensify as construction costs and land values continue to rise. This may push more urban residents toward rental housing and co-living models.

On the commercial side, REIT expansion is set to accelerate. Existing REITs manage ~130 million sq. ft. of office assets and this is expected to almost double within five years. Nearly 85% of REIT-held buildings are green-certified, strengthening the shift toward energy-efficient, institutionally managed, compliance-focused office assets. The flight-to-quality trend is likely to intensify in 2026.

Emerging asset classes, including data centres, industrial parks, co-working, co-living, fractional ownership, managed warehousing and many more, will attract significant capital. Data-centre real estate in particular benefits from AI-driven compute demand, cloud adoption, surging digital consumption and India’s relatively small but rapidly growing server capacity base. These and other emerging asset classes will require policy initiatives and regulations to protect the ecosystem.

With demand shifts, regulatory reforms and capital flows converging, 2026 is set to be a pivotal year for Indian real estate. Affordability, sustainability and digitisation will be the dominant forces shaping long-term sectoral momentum.

(Adarsh Ranka is Partner and Real Estate Sector Leader with a Member Firm of EY Global. Soumya Ranjan is Director, Strategy & Transactions, EY India)