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A few weeks ago, the World Inequality Report 2026 was released. The report highlights the deepening income, wealth, and gender inequalities across India as well as globally. It points out that in India the richest 10% hold about 65% of total wealth, while the top 1% alone own nearly 40%. One of the clearest manifestations of this growing wealth inequality is the exceptionally strong demand for premium and luxury housing among affluent buyers.

Evidence of robust demand for Luxury Homes

Data from IBEF show that India’s housing market is undergoing a structural shift, with a growing preference for larger and more expensive homes. Citing Anarock’s H1 2025 survey, the data reveal that 36% of buyers now prefer homes priced between ₹90 lakh and ₹1.5 crore, up from just 18% in the pre-COVID period.

Luxury housing demand has remained particularly strong. In 2025, sales of homes priced at ₹4 crore and above rose by nearly 28% year-on-year across seven major cities. In Q1 2025 alone, around 1,930 luxury homes were sold in these cities, compared with 1,510 units in Q1 2024, marking a 28% increase.

Rising demand and supportive policies fuel sector growth

Demand in the real estate sector—which comprises housing, retail, hospitality, and commercial segments—has been strong in value terms. Multiple factors have contributed to this trend, including rapid urbanisation, expansion of the rental market, rising property prices, and changing lifestyle preferences.

As a result, the sector is projected to grow at a robust CAGR of 9.2% during 2023–2028.

Government policy has also played a supportive role. Foreign direct invest-ment of up to 100% is permitted in townships and settlement development projects. In the Union Budget 2025–26, ₹1 lakh crore was allocated to the Urban Challenge Fund to transform cities into growth hubs through redevelopment and infrastructure creation. Furthermore, the National Real Estate Policy 2025 introduced a unified single-window clearance system for real estate projects and offered tax incentives and subsidies for green-certified developments to promote sustainable construction.

Structural problems that demand policy attention

While rapid growth of the real estate sector is natural in an emerging economy like India, the sector continues to face deep-rooted challenges that require urgent policy intervention. A substantial body of research, much of it published in Economic and Political Weekly (EPW), has identified persistent problems such as project delays, fraud, illegal construction, weak regulation, high land costs, the influence of the shadow economy, and ongoing housing affordability issues despite multiple government schemes.

Other studies highlight the role of land mafias, the developer–politician nexus, and failures in urban planning. Key concerns include regulatory gaps, speculative land markets, and poor urban governance, all of which adversely affect home buyers, particularly low-income and vulnerable groups.

Why are housing prices above affordability benchmarks?

An important contribution to the debate on housing prices comes from research by Sisir Gupta, Nandini Agnihotri, and Annie George (EPW, 14 September 2024). They observe that a significant share of India’s population still lacks access to decent housing despite decades of affordability-oriented policies. Under-

standing why housing remains expen-sive—and why price growth has been relatively muted over the past decade—is critical to addressing this challenge. Their research shows that India’s housing price-to-income ratio stands at around 11, more than twice the affordability benchmark of five. High prices are attributed to structural deficiencies such as inefficient

land-use planning and implementation, limited transparency in the real estate market, and a pervasive shadow economy. These factors, combined with limited competition, keep housing prices elevated. To improve affor-dability, the authors argue for trans-parent and systematic release of developable land through rigorous land-use planning and enforcement.

Comparing real estate sub-sectors

The residential segment continues to dominate the real estate sector in terms of volume. Commercial real estate (office and IT spaces) follows, while industrial, logistics, and data-centre segments are emerging as the most dynamic in terms of growth and investment. Data from Knight Frank India indicate that homes priced above ₹10 crore now account for more than half of total residential sales across major Indian cities, underscoring the luxury-led nature of the current housing boom.