Market Radar India: Real estate sector to reach USD 5.8 trillion as digital adoption surges

India’s real estate market scales through digital integration

A new report by FICCI-KPMG highlights the Indian real estate sector’s transition from fragmented, traditional practices towards a more institutionalised and technology-driven ecosystem. 

The report underscores the broader economic significance of this transformation, with India’s real estate market projected to grow from USD 650 billion in 2025 to USD 5.8 trillion by 2047. 

Historically centred on land acquisition and market timing, the report value creation is increasingly being shaped by digital integration, with artificial intelligence adoption rising from under 5% in 2023 to 91% by 2025 - reflecting the growing importance of technology in improving operational efficiency, execution certainty, and investor confidence across the sector.

Advanced technologies such as Building Information Modelling (BIM), digital twins, IoT-enabled monitoring, drone-based tracking, and AI-driven valuation tools are becoming central to project planning, construction management, and asset operations - helping developers reduce inefficiencies, improve transparency, and meet the increasingly sophisticated requirements of institutional capital.

Government-led digital infrastructure initiatives are also accelerating this transition, with programmes such as the Digital India Land Records Modernisation, the National Blockchain Framework, and the Survey of Villages and Mapping with Improvised Technology in Village Areas (SVAMITVA) scheme creating a more investment-ready ecosystem.

Despite this progress, the report notes that widespread adoption remains constrained by high implementation costs, fragmented systems, and significant workforce skill gaps. 

In this context, the next phase of growth will depend on moving beyond isolated technology adoption towards integrated, enterprise-wide transformation capable of supporting long-term scalability and reinforcing India’s position as a major global real estate growth market.

Global uncertainty weighs on real estate sentiment

After several quarters of sustained optimism, the current sentiment score in the Indian real estate market fell from 60 in Q4 2025 to 49 in Q1 2026 - amid rising macroeconomic volatility, inflationary pressures, and tighter financial conditions.

According to the latest Knight Frank-NAREDCO Real Estate Sentiment Index, growing concerns around elevated crude oil prices, rising construction costs, and geopolitical uncertainty are beginning to impact both demand and supply dynamics across the sector. 

As a result, developers, investors, and financial institutions are adopting a more measured approach towards capital deployment and project launches in multiple segments, including housing and commercial real estate.

Residential real estate, which had experienced a prolonged expansion cycle in recent years, is now showing signs of consolidation. Sales activity and new launches moderated during the first quarter, with stakeholders anticipating softer demand in the near term as buyer sentiment becomes more cautious.

Nearly half of surveyed participants also expect a slowdown in new project launches, indicating a shift towards greater operational discipline and risk management across the development landscape. 

Despite the softer outlook, the market’s underlying fundamentals remain comparatively resilient. India’s office sector continues to demonstrate stability, supported by strong occupier demand, limited Grade-A supply, and sustained expansion from global capability centres (GCCs). 

The western region also remains relatively more resilient than other parts of the country, maintaining sentiment levels above the neutral threshold despite broader moderation. 

The latest data suggests that the market is not entering a structural downturn, but rather transitioning into a more selective and institutionally disciplined phase of growth. As global volatility persists, industry leaders are increasingly prioritising execution certainty, capital efficiency, and asset quality - reinforcing the broader maturation of the sector. 

Office leasing remains strong amid Modi's remote work appeal

During the first quarter of 2026, India’s office market demonstrated remarkable resilience, with transactions exceeding 100,000 square feet accounting for 65% of total leasing activity across the country’s eight major cities.

According to a report by Knight Frank, these large-scale transactions reached a cumulative 19.5 million square feet during the quarter, representing a 3% year-on-year increase from the already elevated base of 19 million square feet recorded in Q1 2025. Total office leasing across all size categories reached 29.9 million square feet during the period.

Bangalore maintained its leadership position within the large-office segment, recording 7 million square feet of transactions in the category above 100,000 square feet - which accounted for 77% of the city’s total leasing volume of 9.2 million square feet. 

Hyderabad followed with 4.4 million square feet in large transactions, reflecting a 69% increase compared to the 2.6 million square feet recorded during the same period last year, while Mumbai reported substantial growth in this segment, with transactions rising 81% year-on-year to 2.9 million square feet.

At the same time, the sector is beginning to navigate a new variable following Prime Minister Narendra Modi’s appeal to reassess work-from-home practices in an effort to reduce fuel consumption and preserve foreign exchange reserves amid geopolitical instability.

Although a widespread return to fully remote work remains unlikely, the initiative is expected to reinforce hybrid workplace models and accelerate demand for flexible satellite offices located closer to residential catchments and suburban growth corridors.

This evolving workplace dynamic is already influencing residential demand patterns, with homebuyers increasingly prioritising larger homes that incorporate dedicated workspaces alongside integrated community amenities. 

The gradual decentralisation of the workforce is also emerging as a structural growth catalyst for Tier-2 and Tier-3 cities such as Bhubaneswar, Chandigarh, and Visakhapatnam, where infrastructure investment and industrial expansion are expected to support long-term land value appreciation.

While commercial leasing fundamentals remain resilient in the near term, the sector’s long-term growth trajectory is becoming increasingly linked to flexibility, asset quality, and the continued expansion of India’s economic activity beyond its traditional metropolitan centres.
 

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