Real estate margins to improve to 33% in FY27: Brickwork Ratings
Mumbai, 1st September, 2026: The credit outlook for the real estate sector remains stable, even as revenue growth is expected to contract to -0.2% in FY26 from 15.8% in FY25, according to Brickwork Ratings (BWR). Revenue growth is forecast to recover to 5.5% in FY27, supported by strong demand for luxury housing.
The sector continues to benefit from a 31% YoY increase in residential sales across leading cities and 10%-12% luxury housing price appreciation in FY25. However, price volatility across residential and commercial properties, rising construction costs and a strategic shift towards mid-income housing are weighing on near-term revenue growth.
Margins improve despite slower growth
Operating margins are expected to improve to 32.0% in FY26 from 30.1% in FY25, before stabilising at 33.3% in FY27. The improvement is expected to be supported by inventory clearance and a greater contribution from higher-margin premium residential projects, data centres and warehousing spaces.
Financial resilience remains supported by low gearing among top-tier developers, who increasingly rely on joint development agreements rather than heavy debt. Strong pre-sales collections, private equity funding and REIT listings are also helping developers manage liquidity and leverage.
Interest coverage is expected to remain steady at 2.8x in FY26, while the debt service coverage ratio is projected at 1.1x, providing financial headroom despite higher construction borrowing and mezzanine funding requirements.
Key risks remain concentrated
Unsold inventory remains a concern, with Mumbai and Pune carrying housing stock equivalent to more than 30 months of sales, potentially delaying new project launches and pressuring cash flows. Refinancing requirements also remain vulnerable to movements in interest rates.
Outlook: Funding requirement, housing segment growth and supply pipeline
- Funding opportunity: India’s real estate sector is estimated to require nearly INR 50,000 billion (~INR 50 trillion) of capital over the next decade, with the sector expected to grow into a USD 1 trillion market by 2030[1]. Residential development is expected to command the larger share of this requirement given its weight in overall sector activity, while commercial real estate continues to draw a disproportionate share of near-term institutional capital: office assets alone accounted for over 40% of India’s institutional real estate inflows in H1 2026 (~USD 1.9 billion), against roughly USD 0.5 billion into residential[2]. This is echoed in company-level data: BWR’s own analysis of a sample of listed housing construction companies shows ~INR 2,340 billion of unsold inventory and ~INR 1,090 billion of total borrowings carried on balance sheet in FY25, against ~INR 1,240 billion of customer advances indicating financing pressure on mezzanine debt for funding and high reliance on customer advances at the company level rather than a market-wide total.
- Housing opportunity: Growth is increasingly concentrated in the mid and premium segments. Premium and luxury housing now account for over half of all new launches nationally, while affordable housing’s share of new launches fell to just 6% in Q2 2026, down from nearly 52% in 2018 – even as the segment’s underlying need stays large, with an estimated shortfall of roughly 25 million affordable homes by 2030 that remains structurally underfunded relative to demand. The premium (INR 10 million+) segment’s share of new launches across the top seven cities has risen from 45% in Q1 2025 to 64% in Q1 2026[3]. The overall value of homes sold across India’s leading cities is projected to grow 10–12% in FY27 over FY26, even as unit volumes decline by roughly 3–4%, reflecting the sector’s continued mix-shift toward higher ticket sizes.
- Supply outlook: New residential supply across India’s leading eight cities is expected to stay elevated through CY27. Residential launches are expected to remain above 300,000 units in 2026[4], supported by urbanisation and infrastructure upgrades. On a unit basis, the top eight cities added roughly 187,000 new units in H1 2026 alone[5] – a run-rate that, if sustained, implies annual supply in the 350,000–400,000-unit range through CY26–CY27, with Mumbai, Bengaluru and Pune together accounting for close to 60% of all new launches in early 2026.
Overall, BWR expects steady demand for luxury housing and prime commercial office spaces, alongside continued institutional investor support, to sustain the sector’s financial health through FY27.
[1] ANAROCK Capital / ANAROCK Group / ANAROCK Research, various publications, 2026, including “Powering the Next Decade: India’s Real Estate Finance Transformation Story” (May 2026) and estimates reported in Outlook India, The Week, MediaBrief and Afaqs.
[2] Colliers, India Real Estate Investment Report, H1 2026.
[3] JLL, Residential Market Viewpoints, Q1 2026.
[4] Cushman & Wakefield, India Residential MarketBeat, Q1 2026 and 2026 outlook; also cited in ANI, “Mumbai, Bengaluru and Pune drive 60% of India’s Q1 2026 residential launches”, April 2026.
[5] Knight Frank India, India Real Estate: H1 2026 residential data.
(Disclaimer: The information provided here is investment advice only. Investing in the markets is subject to risks and please consult your advisor before investing)
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