Investment Information and Credit Rating Agency ICRA has released its analysis of the Bengaluru residential real estate market, projecting a 3-5% increase in area sold during the fiscal year 2026, driven by sustained demand in the mid-income and luxury segments.
The city, which is the fourth largest residential market among India’s top seven cities, accounted for 14-15% of the total area sold across these metros between FY2021 and FY2025. The market had witnessed a decadal high with 102 million square feet (msf) of area sold in FY2024, reflecting a Compound Annual Growth Rate (CAGR) of 27% over FY2021-FY2024. Following this peak, FY2025 saw a marginal contraction of 2% year-on-year to 99 msf. This dip was primarily attributed to a sharp 41% decline in the affordable housing segment, which now constitutes only 6% of total sales. In contrast, the mid-income and luxury segments posted modest gains of 3% each during FY2025.
The first half of FY2026 has already seen a strong uptake, with area sold standing at 52 msf, a 14 per cent year-on-year growth. Sales in the second half are expected to remain steady on a yearly basis, with the launch pipeline largely concentrated in the fourth quarter.
On the supply side, new residential launches in Bengaluru surged to 124 msf in FY2025, a CAGR of 34 per cent over FY2021-FY2025. For FY2026, ICRA projects a 10-12 per cent year-on-year increase in launches, aided by comfortable inventory levels, sustained demand in the mid and luxury segments (Rs. 2.0-3.5 crore), and a smoothening of the e-khata process. Launches in H1 FY2026 grew 7 per cent YoY to 63 msf.
A key metric, the Years to Sell (YTS) for unsold inventory, improved to a decadal low of 0.8 years as of March 2024 from a peak of 2.5 years in June 2020. Despite new launches outpacing sales in FY2025 and H1 FY2026, the YTS remained comfortable at around 1.1 years as of March 2025 and September 2025.
ICRA expects the YTS to edge up to 1.2-1.4 years by March 2026, while remaining at comfortable levels. This is due to the slight increase to a healthy luxury launch pipeline and recent moderations in sales velocity for that segment.
The report highlighted a significant shift in market dynamics. While Bengaluru’s housing sales were historically centered on the mid-income segment, buyer preferences have shifted towards larger, premium homes since FY2023.
In a notable trend, luxury launches overtook mid-income launches for the first time in H1 FY2026, comprising 49 per cent of total launches. This is a significant increase from 37 per cent in FY2025 and just 19 per cent in FY2021.
However, a recent slowdown in sales velocity for ultra-luxury homes is likely to prompt developers to adopt a more cautious approach to new launches in this segment in the near to medium term.
The report is based on data from PropEquity and ICRA Research. The top seven cities include the Mumbai Metropolitan Region (MMR), Delhi National Capital Region (NCR), Bengaluru, Hyderabad, Pune, Kolkata, and Chennai.
