Market Radar India: Goldilocks Economy Fuels Real Estate Optimism

RBI cuts rates to 5.25% amid 8.2% growth, luxury housing prices rival Lower Manhattan, and data centre boom hits USD 100bn

December 9, 2025Real Estate

Key Takeaways

The Reserve Bank of India lowered the repo rate to 5.25% to sustain 8.2% economic growth and record-low inflation.
Mumbai luxury property prices have risen to equal Lower Manhattan levels while the wider market faces a deficit of 10 million affordable homes.
Conglomerates are fueling a USD 100 billion data centre expansion that risks being stifled by severe electricity and water shortages.

The Macro View

India's economy is enjoying a "Goldilocks period" of strong growth and low inflation, according to Reserve Bank of India (RBI) Governor Sanjay Malhotra.

In a widely anticipated move, the RBI cut the repo rate by 25 basis points to 5.25%, marking a total reduction of 125 basis points for the year.

This decision comes on the heels of robust 8.2% GDP growth in the July-September quarter, driven by private spending and a surge in exports.

The rate cut is viewed as a significant boost for the real estate sector. With inflation at record lows - retail inflation stood at 0.25% in October - lower borrowing costs are expected to ease EMIs and improve affordability for homebuyers.

Developers anticipate this will clear unsold inventory and accelerate project launches, particularly in premium markets like Mumbai and NCR.

Trend Spotlight: Housing & Commercial Real Estate

Luxury Sector Peaks

While luxury housing has been a key driver, analysts predict this segment may lose steam within five years. Currently, however, prices remain sky-high; premium apartments in Mumbai’s Worli district now rival those in Lower Manhattan, trading at INR 100,000 (over USD 1,100) per square foot.

Affordable Housing Crunch

A supply gap persists in the affordable segment as developers shift focus to high-margin luxury projects, leaving new launches in the budget category at a standstill. India is already short of approximately 10 million affordable homes, a deficit projected to triple by 2030, with average prices in hubs like Gurgaon now far outstripping average income levels.

IPO Fever

RMZ Corp., one of India's largest developers, is weighing a USD 1 billion IPO for late next year, potentially the largest real estate listing since 2007. The move capitalises on a record streak of fundraising in India's primary market and is backed by confidence from major global investors like the Canada Pension Plan Investment Board.

SM REITs on the Rise

The Small and Medium Real Estate Investment Trusts (SM REITs) market is poised to cross USD 75 billion, democratising access to mid-sized commercial assets valued between INR 50 crore and INR 500 crore.

This emerging segment is supported by over 500 million square feet of eligible office and retail assets, offering a new avenue for fractional ownership in high-quality properties.

Sector Watch: Data Centres

A massive USD 100 billion investment boom is underway to close the gap between India hosting 20% of the world's data but holding less than 6% of global capacity.

While conglomerates like Adani and Reliance are rushing to build, this expansion faces severe hurdles; beyond consuming 2.6% of India's electricity by 2030, these facilities pose a water risk, with a single 1 MW load requiring roughly 25.5 million litres annually for cooling.