India’s housing market is sending mixed signals, leaving potential buyers scratching their heads.
All-India Housing Price Index by the RBI (the index is based on home prices in 18 cities) increased by 3.6 per cent (y-o-y) in Q1:2025-26. On a sequential (q-o-q) basis, All-India Housing Price Index increased by 2.0 per cent in Q1:2025-26.
But here’s the catch: volume growth is actually moderating in the real estate sector.
So what is happening here? Why are home prices rising when buyers are hesitating?
The Affordability Paradox
Here’s the fundamental paradox.
Many of India’s major metros have become fixated on luxury and ultra-luxury segments. Limited land availability and high replacement costs in these markets continue to support price appreciation. Chasing premium buyers and high margins has become the default strategy for most developers.
Yet, the data shows that tier-2 cities that maintain accessible options continue to demonstrate strong demand for smaller, more affordable configurations.
The luxury segment’s strong performance creates impressive headline numbers, but it doesn’t solve the fundamental challenge: making homeownership accessible to the vast middle class.
External Pressures
The situation becomes more complicated when external pressures are factored in.
Recent US tariffs on Indian exports could strain home sales further in the coming quarter, adding another layer of uncertainty.
But for cities like Kolkata, which have built their growth on value propositions rather than luxury premiums, these external shocks could actually prove less disruptive.
It’s like comparing a luxury yacht to a well-built fishing boat. When the economic storms hit, the yacht might look impressive, but the fishing boat keeps working.
Kolkata’s Quiet Revolution
While much attention typically focuses on India’s pricier metros, Kolkata has been writing its own interesting chapter in the housing story. The city registered noteworthy growth in the Housing Price Index, driving growth that’s catching the industry-watchers by surprise.
What makes Kolkata’s situation particularly intriguing is that it represents something different from the usual narrative of luxury-driven price surges.
According to market observers, the city is attracting buyers seeking value and improved lifestyle amenities. A combination that’s becoming increasingly rare in India’s overheated housing markets.
The housing preference in Kolkata leans toward compact configurations, aligned with local affordability dynamics. This isn’t about flashy penthouses or sprawling villas. It’s about practical housing that matches what people can actually afford.
What Kolkata Gets Right
Here’s where Kolkata’s story becomes particularly relevant.
Think of India’s housing market as a restaurant menu. Most major metros have decided to serve only expensive multi-course meals, abandoning the affordable thali that most diners actually want. Kolkata, on the other hand, has kept both options on the table.
While other markets grapple with affordability crises and luxury-focused development, Kolkata has maintained a relatively grounded approach. The city’s growth isn’t driven by speculative frenzy or ultra-luxury projects that price out ordinary buyers.
Buyers are finding options that offer improved amenities without astronomical price tags. The focus on compact, affordable configurations means that the market serves a broader spectrum of buyers rather than catering exclusively to the wealthy.
This doesn’t mean Kolkata lacks premium housing options. They exist, certainly. But the city hasn’t abandoned its middle-market buyers in pursuit of higher margins.
The Missing Piece Emerges
And there it is, the missing piece that Kolkata inadvertently highlights.
India’s housing-for-all dream depends heavily on the mid-segment performing well, but affordability pressures are mounting precisely in this category across most major markets.
Kolkata’s relative success in maintaining affordability while still showing growth demonstrates something crucial. It’s possible to build a thriving housing market without completely abandoning accessible price points.
(However, the recent upward revision of circle rates will compel homebuyers to fork out more cash.)
The city proves that value-seeking buyers represent a substantial market segment that deserves attention.
The Path Forward
Market observers suggest the housing sector sits at an interesting crossroads. Stable monetary policy, government initiatives promoting homeownership, and strong underlying demand position will help markets for sustained expansion.
The stable repo rate environment, with a 100-basis point cut in the first half of 2025, keeps financing costs manageable despite rising property prices.
Yet affordability pressures in major cities represent a key challenge that threatens long-term market health.
So what’s truly missing from India’s housing picture?
It’s not just about supply and demand, or even interest rates and inflation. The missing piece is a comprehensive strategy that addresses the middle market, where India’s housing dreams actually live.
Kolkata’s example shows this isn’t impossible. The city has managed to register noteworthy growth while maintaining focus on value and affordability. It proves that housing markets can thrive without leaving ordinary buyers behind.
