Luxury Housing Demand and Strong Office Leasing Lift Real Estate Sentiment in Q3 2025

India’s real estate sector continues to gain momentum in 2025, supported by rising buyer confidence, strong commercial activity, and stable macroeconomic conditions. At the centre of this optimism is the surge in Luxury housing demand, coupled with the continued strength of office leasing across major metros. Together, these two segments are shaping market sentiment and driving positive expectations for the coming quarters.

The latest Knight Frank–NAREDCO Real Estate Sentiment Index highlights this upward trajectory. While consumption trends remain steady and inflation has eased, developers and financial institutions are seeing a balanced environment that supports growth. With both current and future sentiment scores staying firmly optimistic, the sector is positioned for consistent progress as the year unfolds.

Real Estate Sentiment Index: Key Trends From Q3 2025

The Q3 2025 Sentiment Index paints a clear picture of a sector moving in the right direction. The Current Sentiment Score rose from 56 in the previous quarter to 59, indicating improved confidence among stakeholders. At the same time, the Future Sentiment Score held steady at 61, signalling expectations of stability and sustained growth in the medium term.

Developers and non-developers alike expressed optimism, driven by steady macroeconomic indicators, robust end-user activity, and consistent leasing volumes in commercial markets. As liquidity improves and policy conditions remain predictable, real estate participants feel more assured about launching new projects, acquiring land, and scaling operations. This environment is particularly favourable for segments benefiting from structural demand, especially luxury housing and premium office spaces.

Also Read: India’s Q3 Retail Leasing Touches 3.2 Mn Sq Ft, Rising 65% YoY

Luxury Housing Demand and the Depth of India’s Office Market

One of the biggest trends this year has been the continued rise of Luxury housing demand across India’s top cities. Despite broader economic uncertainties, the premium residential segment has shown remarkable resilience. High-income buyers remain active, driven by upgraded lifestyle aspirations, better credit profiles, and a preference for branded, amenity-rich developments.

Developers are responding accordingly. Many are shifting their focus toward premium and high-ticket projects, where demand remains steady and margins are more robust. This transition reflects not only evolving buyer preferences but also the maturity of the housing market, where end-users are prioritising long-term value over price sensitivity.

On the commercial front, India's office leasing market continues to show structural depth. Strong pipelines in Bengaluru, Hyderabad, and NCR highlight sustained interest from global capability centres (GCCs), IT/ITeS firms, engineering companies, and BFSI occupiers. The combination of high-quality supply and competitive rental values has positioned India as a long-term growth destination.

Together, these two segments luxury housing and modern commercial offices are reinforcing confidence and shaping sentiment across the industry.

Zonal Sentiment: South India Continues to Dominate

The southern region remains the strongest performer in the sentiment index, with a score of 62 in Q3 2025. Bengaluru and Hyderabad continue to outshine other cities due to their stable job markets, deep office leasing pipelines, and rising Luxury housing demand from high-income professionals, NRIs, and investors.

The North Zone has also shown improvement, rising to 56, aided by consistent office absorption in the NCR and steady performance of micro-markets such as Gurugram and Noida.

Meanwhile, the East Zone witnessed a slight decline, primarily due to fewer residential launches compared to earlier quarters. The West Zone dipped to 59, but Mumbai and Pune continue to witness healthy leasing activity, even if residential performance has been more moderate.

Overall, the strength of the southern cities underscores a broader shift buyers and occupiers are gravitating toward markets that offer better job creation, transparent governance, and high-quality real estate supply.

Market Fundamentals Remain Strong and Broad-Based

The buoyant sentiment reflected in the index is not accidental. It stems from strong market fundamentals that continue to support sustainable growth:

• Structural office demand driven by India’s global competitiveness
• Resilient premium housing sales owing to rising disposable incomes
• Improved liquidity, with institutional investors actively deploying capital
• Stable regulatory policies, including RERA and evolving state-level reforms

With inflation easing and interest rates holding steady, both developers and homebuyers are operating in an environment of increased financial predictability. This broader stability is one of the reasons why Luxury housing demand has remained strong across metros—buyers feel more confident making long-term purchase decisions.

Developer vs. Non-Developer Outlook

Developer Sentiment

Developer sentiment eased slightly from 63 to 59, reflecting concerns around rising input costs, labour shortages, and slower traction in mid-segment housing. However, developers are strategically shifting toward premium launches to align with the ongoing momentum in luxury and upper-mid segments.

Project pipelines in Bengaluru, Hyderabad, Pune, and NCR increasingly reflect a preference for high-specification units, branded residences, and integrated communities. This shift is expected to continue through 2026.

Non-Developer Sentiment

Non-developers, including banks, NBFCs, private equity funds, and institutional investors, remain steadily optimistic. The future sentiment score for this group stands at 61, underscoring their confidence in the sector’s long-term fundamentals.

For financial institutions, premium residential and Grade A commercial portfolios remain preferred asset classes. The continued traction in Luxury housing demand is also helping maintain stable funding cycles across the sector.

Residential Launches and Sales: Outlook for 2025

Stakeholders expect the overall residential market to remain stable and positive through the rest of the year. According to the index:

• 71% of respondents anticipate that new residential launches will increase or remain steady
• Developers are prioritising luxury and upper-mid projects, where demand is strongest
• Supply in mid-income and affordable segments is being moderated to avoid oversupply
• 74% expect sales to improve or remain steady, driven by end-user demand, developer incentives, and stable interest rates

Cities like NCR, Bengaluru, and Hyderabad continue to lead in Luxury housing demand, with strong absorption levels even in higher price brackets. This segment’s performance is also contributing to price appreciation and overall market confidence.

Price Momentum Across Metros

Property prices in NCR, Bengaluru, and Hyderabad recorded 13%–19% year-on-year increases in Q3 2025. This upward momentum reflects:

• Higher purchasing power among buyers
• Upgraded lifestyle aspirations
• Strong investor interest in premium developments
• Better-quality supply with modern amenities

Rising Luxury housing demand is directly contributing to the price trajectory of premium projects, especially in sought-after micro-markets like Gurugram, Whitefield, and HITEC City.

Also Read: India’s Data Centre Capacity Surpasses 1.5 GW, Mumbai Holds 53% Share

Expert Insight: What Sector Leaders Are Saying

Industry leaders believe India’s economy is well-positioned to support continued real estate growth. Stable policy frameworks, healthy consumption patterns, and a strong services sector are expected to sustain the momentum across asset classes.

The combination of robust office leasing and strong luxury housing sales is creating structural resilience. As we move toward 2026, developers, investors, and occupiers anticipate steady market evolution supported by long-term demand drivers rather than short-term fluctuations.

Conclusion

India’s real estate market has entered a phase of healthy, broad-based expansion. The rise in Luxury housing demand, along with the strength of office leasing, is shaping market sentiment in meaningful ways. Backed by macroeconomic stability, improved liquidity, and sustained investor interest, the sector is expected to maintain its positive trajectory.

With Bengaluru, Hyderabad, and the NCR region leading the charge, India’s real estate landscape is poised for continued growth, stronger fundamentals, and deeper participation across both residential and commercial segments.