India’s real estate sector witnessed a notable divergence in Q1CY26, with residential sales experiencing a 4 per cent year-on-year decline, while office leasing soared to a quarterly high, reflecting shifting dynamics in the property market.

India’s residential real estate market showed signs of moderation in the first quarter of calendar year 2026 (Q1CY26), with sales declining 4 per cent year-on-year (Y-o-Y), while office leasing during the same period touched a quarterly high, according to Knight Frank India.

Residential sales during the quarter stood at 84,827 units, down from 88,361 units in Q1 2025. In contrast, office leasing rose 6 per cent Y-o-Y to 29.9 million square feet (msf).

Large-volume markets saw Y-o-Y declines in sales, even as underlying demand drivers remained intact, according to Knight Frank.

In Mumbai, sales were down 7 per cent, while the National Capital Region (NCR) and Pune saw 11 per cent declines each.

Residential Market Trends

Shishir Baijal, international partner, chairman and managing director, Knight Frank India, said the moderation partly reflects natural consolidation after strong growth.

However, he added that rising prices alongside softening volumes signal mounting pressure on affordability and absorption.

A volatile geopolitical environment and sustained correction in equity markets have contributed to subdued residential demand, he said.

Market activity remained skewed towards higher-priced homes, while volumes declined in segments below Rs 1 crore.

Units priced above Rs 1 crore grew 11 per cent Y-o-Y in Q1CY26, whereas the sub-Rs 50 lakh and Rs 50 lakh-1 crore segments fell 23 per cent and 12 per cent, respectively.

Growth was led by the Rs 1-2 crore segment, which rose 10 per cent Y-o-Y and accounted for 29 per cent of total sales.

Prices continued to rise despite a moderation in sales and supply during the January-March period, with all markets recording Y-o-Y increases.

The highest appreciation was seen in NCR, led by Ghaziabad at 13 per cent and Greater Noida at 11 per cent.

Office Space Dynamics

Across the top eight cities, quarters-to-sell (QTS) edged up to 6 quarters in Q1CY26 from 5.9 in the same period last year.

Unsold inventory also rose 3 per cent Y-o-Y to 519,844 units.

While launches declined 2 per cent Y-o-Y, they continued to outpace sales for the 14th consecutive quarter.

Meanwhile, office space demand continued to outstrip completions as developers remained focused on residential projects.

Around 14 msf of office space was delivered across eight major cities in Q1CY26, a sharp 154 per cent Y-o-Y increase, but still less than half the space absorbed during the quarter.

The persistent supply-demand gap since 2021 has steadily tightened market conditions.

Vacancy levels compressed from 17.2 per cent in 2021 to 14.4 per cent in Q1 2025 and further to 13.9 per cent in Q1 2026.

Consequently, rental growth remained positive during January-March this year, ranging between 2 per cent and 15 per cent Y-o-Y across cities.

NCR and Kolkata led gains at 15 per cent each, while Hyderabad and Chennai recorded increases of 8 per cent Y-o-Y.

Rent levels in Mumbai and Bengaluru rose more moderately, by 6 per cent and 7 per cent Y-o-Y, respectively.

Bengaluru remained the largest office leasing market, recording 9.2 msf of leasing activity.

Global capability centres (GCCs) continued to dominate as the largest end-user segment, leasing 14.4 msf and accounting for 48 per cent of total leasing in Q1 2026.

Baijal added that while near-term uncertainties may influence decision-making timelines, India’s underlying stability and structural growth drivers are expected to sustain leasing momentum and support a positive medium-term outlook for the office market.