The Reserve Bank of India (RBI) has cut policy rates by a cumulative 100 basis points in the first half of 2025, easing borrowing costs and improving liquidity in the economy. However, the benefits of cheaper credit are not translating into higher traction for affordable and mid-segment housing, according to the latest Knight Frank–NAREDCO Real Estate Sentiment Index (Q2 2025).
The report notes that while the overall Future Sentiment Score rebounded to 61 in Q2 2025 from 56 in the previous quarter, optimism remains concentrated in premium housing and office markets.
Premium Homes Surge, Mid-Segment Stalls
“Residential market sentiment in Q2 2025 remains cautiously positive, with 70% of stakeholders expecting either stable or higher launches. This growth, however, is driven largely by the premium housing segment, particularly units priced above ₹10 million (₹1 crore),” the report highlighted.
In contrast, affordable and mid-segment launches are slowing down. Developers are increasingly prioritizing high-value projects in cities like Bengaluru, Hyderabad, and NCR, where demand remains robust.
Affordability Challenge Deepens
Despite financing schemes and incentives, affordability remains the biggest hurdle for lower ticket housing. Only 52% of stakeholders expect stable or improved sales in the next six months, up marginally from 50% in Q1 2025, reflecting sluggish momentum in the budget category.
Knight Frank’s research notes that 94% of stakeholders foresee stable or increasing residential prices, with Bengaluru, NCR, and Chennai recording double-digit year-on-year growth in H1 2025. Rising prices, combined with stagnant wage growth, have widened the affordability gap for first-time buyers.
Developers and Lenders Shift Focus
The report also shows a sharp improvement in developer sentiment, rising to 63 from 53. Most of this optimism stems from premium housing and Grade A commercial projects, where returns are higher and financing is easier to secure.
Non-developer stakeholders, banks, NBFCs, and private equity funds, are also tilting towards premium projects. The report highlights that funding is flowing more freely to large-ticket, low-risk inventory, while affordable housing continues to face cautious underwriting.
Outlook: Premium Remains the Sweet Spot
G. Hari Babu, National President of NAREDCO, observed that “India’s real estate sector is regaining stability after a year of moderation. Developers are focusing on high-quality inventory as liquidity improves and borrowing costs ease.”
“Despite RBI’s supportive stance on rates, affordable housing continues to struggle as rising property and construction costs have pushed even entry-level homes beyond the reach of first-time buyers. Meanwhile, developers and lenders prefer premium housing for its better margins and lower risks. To revive demand, stronger policy support is needed in the form of targeted subsidies, lower GST on budget homes, and easier credit access for both buyers and developers.” – Kushagr Ansal, Director, Ansal Housing.
Vishal Sabharwal, Head Sales, Orris Group, says, “The sentiment index’s positive swing isn’t just statistical, it mirrors the renewed confidence we see among homebuyers, investors, and corporates across NCR. In housing, end-users are upgrading faster, while in commercial real estate, demand from new-age businesses and flexible workspace operators is driving leasing activity. Importantly, the market today is far more structured, transparent, and quality-focused than a decade ago, and with policy stability, infrastructure delivery, and a clear appetite for both living and working spaces, we foresee NCR positioned to remain one of India’s most dynamic markets in the years ahead.”
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For homebuyers, this means affordability pressures are unlikely to ease soon. While RBI’s rate cuts have lowered EMIs, rising property prices in metros are pushing affordable homes further out of reach. The market momentum, at least for now, remains firmly with premium buyers.
