Indian Housing Market Faces Setback | 28% Sales Drop in Q1 2025 Amid Rising Prices and Geopolitical Tensions

In the first quarter of 2025, India's residential real estate market experienced a significant slowdown, sending ripples through the sector. The country's housing sales took a sharp 28% dip compared to the same period in 2024. Despite this downturn, home prices have continued their upward climb, with the effects of rising costs and geopolitical uncertainties casting a long shadow over the market.

The latest data from ANAROCK, a leading property consultancy, highlights a sharp contrast to the robust sales figures of Q1 2024, which saw a record-breaking 1.30 lakh units sold. By the end of Q1 2025, sales in the top seven cities dropped to approximately 93,280 units. This is a stark decline, but what is even more intriguing is the consistent rise in prices across the board.

The Market Landscape: A Geopolitical Strain

India's top metropolitan regions have been the focus of this downturn, with Mumbai Metropolitan Region (MMR) and Pune accounting for more than half of the country's sales in Q1 2025. However, even these regions couldn't escape the pressures of rising property prices and external economic factors.

Anuj Puri, Chairman of ANAROCK Group, commented on the situation: "The rising costs and geopolitical tensions have led to a slowdown in the market. While MMR and Pune contributed to 51% of the total sales, both regions saw drops of over 26% and 30%, respectively. Hyderabad, on the other hand, had the most significant sales decline at 49%."

While sales have fallen, the demand for homes in these regions remains strong, but the luxury housing segment continues to attract more buyers. The price surge in cities like NCR and Bengaluru has fueled the demand for high-end properties, pushing the overall price range significantly higher.

New Launches: A Decline in Supply

As demand for real estate softens, the number of new launches has also seen a decline. In Q1 2025, new launches across India's top seven cities totaled approximately 1,00,020 units, marking a 10% drop compared to Q1 2024, which saw about 1,10,865 units launched.

The regions driving new supply in Q1 2025 were MMR, Bengaluru, and Pune. The luxury housing market remains a focal point of growth, with Bengaluru alone seeing a 27% increase in new supply. While some cities like NCR and Kolkata showed an increase in new launches, Hyderabad was significantly affected, witnessing a drastic 55% drop in new supply.

The reason for this drop can largely be attributed to external factors—geopolitical uncertainty and inflation being at the forefront. These have resulted in hesitations among builders and developers, causing a slowdown in construction activities and a resultant drop in new launches.

Unsold Inventory: A Shrinking Market

The paradox of India's real estate market in Q1 2025 is that, despite the decline in sales and new launches, unsold inventory also fell by 4%. At the close of Q1 2025, there were approximately 5.59 lakh unsold units left in the top seven cities. Pune showed the most notable reduction, with a 16% decrease in unsold stock, indicating that the market is absorbing inventory despite lower sales numbers.

However, other cities like Bengaluru saw an increase in unsold units by as much as 28%. This surge in unsold stock is attributed to the ongoing slowdown in demand, primarily driven by high prices and uncertain geopolitical factors.

Price Trends: Luxury Takes the Lead

A closer look at the pricing trends reveals a continuing upward trajectory. Prices have spiked by 10% to 34% year-over-year across the seven cities, with NCR and Bengaluru witnessing the steepest price increases—34% and 20%, respectively.

Luxury housing continues to be the main driver behind these price hikes, especially in areas like MMR, Bengaluru, and Hyderabad. The demand for ultra-luxury homes priced above INR 1.5 Cr is increasing, but the general population is being priced out of the market due to these steep increases.

Conclusion: The Road Ahead

Despite the challenges, India’s real estate market remains resilient. With the country's GDP growth forecasted to be among the highest globally and inflation under control, there are still glimmers of hope for recovery. However, the rise in housing prices, combined with ongoing geopolitical tensions and an uncertain global economic climate, will continue to weigh heavily on the market.

As we progress through 2025, it will be interesting to see how these factors play out. Will the market stabilize, or will high prices and global tensions continue to put the brakes on India's once-booming real estate sector?