Indian Commercial Real Estate Supply & Demand Outlook FY26
The commercial real estate market in India is expected to see steady growth in the financial year 2025-26, with supply projected to increase by 5-6%, reaching around 1,360 million square feet. However, new office space in Indian commercial real estate is forecast to decline to about 52 million square feet in FY26, following a significant 106 million square feet in FY25, primarily driven by Bengaluru and the Mumbai Metropolitan Region (MMR).
While new supply is set to slow, demand is expected to grow faster in FY26, with absorption likely to increase by 7-8%, compared to 21% in FY25. MMR and Chennai are expected to lead absorption, with MMR seeing a 60% increase and Chennai growing by 22%. The supply-to-absorption ratio has improved and is expected to continue trending downward in FY25 and FY26, reflecting strong demand in key markets.
Bengaluru and Chennai are anticipated to benefit from favorable conditions, with lower supply-to-absorption ratios. These cities will likely experience stronger rental growth and lower vacancy rates, while cities like NCR, Hyderabad, and Ahmedabad may face slower growth due to higher ratios.
Leasing activity across India’s top cities is projected to reach record levels, with leasing of 60 million square feet in FY25 and 64 million square feet in FY26. Demand for Indian commercial real estate is largely driven by sectors such as Global Capability Centers (GCCs), engineering, BFSI, and co-working spaces.
Rental growth is expected to remain moderate, with annual increases between 3-5% in FY26. Property price growth will likely slow, ranging from 2-3%, compared to 3-7% in FY25. Vacancy rates are anticipated to stabilize between 14-18% across major cities.
REITs (Real Estate Investment Trusts) are expected to continue outperforming non-REIT assets, benefiting from diversified portfolios and stronger tenant retention. As of H1 FY25, REITs held 122 million square feet of commercial and retail assets, with continued growth expected as more assets are developed.
Overall, the outlook for Indian commercial real estate in FY26 is promising, with steady growth in leasing, rental yields, and REIT performance.
Read more: NCR Office Space Market Sees 29% Growth in Deal Size
for more updates follow us on instagram
