Premium Housing Segment Delivers 40% Price Growth While Budget Homes Struggle to Keep Pace

India's residential real estate market is witnessing a significant divergence in performance between the luxury and affordable housing segments, with premium properties registering substantially higher price appreciation and stronger investor interest compared to budget homes.

Luxury Properties Record Superior Price Appreciation

According to market data from India's top seven real estate markets, the price per square foot for luxury homes has increased from approximately ₹14,530 in 2022 to ₹20,300 in 2025. This represents a growth of nearly 40% over the three-year period, industry reports have indicated.

In contrast, affordable housing units priced below ₹40 lakh have reportedly witnessed a price increase of only 26% during the same timeframe. This stark difference in appreciation rates has prompted a notable shift in both investor sentiment and developer priorities across the country.

Key Factors Behind the Luxury Housing Surge

Industry analysts have attributed the outperformance of the premium segment to several interconnected factors. Branded developers and projects in prime locations have reportedly been driving demand for larger, quality homes with superior amenities.

Rising input costs, including land acquisition expenses, construction materials, and labour wages, have been squeezing profit margins for affordable housing projects. This has made the budget segment increasingly less attractive for developers and institutional investors alike, according to market observers.

Homebuyers and investors have increasingly demonstrated a preference for mid-to-premium segment properties, valuing factors such as resale potential, lifestyle amenities, and overall quality of living over bargain pricing, reports have suggested.

Market Implications and Developer Strategy Shifts

The shifting dynamics have had significant implications for the broader housing market. Affordable housing appears to be losing its appeal as an investment asset class, even as genuine demand persists among first-time buyers and budget-conscious homeowners seeking affordable housing projects in prime locations.

Real estate developers are reportedly expected to pivot further towards mid-segment and luxury housing projects to capture higher margins and sustained investor interest. This strategic shift could potentially widen the affordability gap, pushing average ticket sizes upward across major metropolitan markets.

The rising supply and demand pressure in premium markets may also impact housing accessibility for middle-income families seeking quality homes in established urban centres, industry experts have noted.

Guidance for Homebuyers and Investors

Market analysts have suggested that those seeking long-term capital appreciation may potentially benefit more from investing in premium and luxury homes compared to budget or affordable units. However, prospective buyers in the affordable segment should factor in slower price appreciation and possibly longer holding periods when making purchase decisions.

Real estate investors have been advised to carefully evaluate multiple parameters beyond just pricing when considering affordable versus premium housing. Key factors such as location quality, developer track record, demand trends, and future infrastructure developments should reportedly inform investment decisions.

For those exploring premium properties in major cities, understanding the best cities to buy property in India could provide valuable insights into emerging opportunities.

Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Real estate investments are subject to market risks, and prospective buyers should conduct independent research and consult qualified professionals before making any property purchase or investment decisions. The price data and market trends mentioned are based on reported industry sources and may vary across different locations and time periods.