Banks are leaning on luxury homes to revive mortgage growth, creating bespoke loan products to tap into rising demand for premium housing in big cities or their outlying elite suburbs. "The premium segment is defying gravity and that is where the growth is," said Manu Singh, business head of housing finance, Kotak Mahindra Bank. "Buyers want luxurious and larger homes; they want their second or third homes in Alibaug or Gurgaon. For us, home loans are a relationship product-we want to be a banking partner for the affluent segment through this journey." Luxury homes are typically defined as those priced above ?2 crore in Mumbai and Delhi, and ?1.5 crore in other metros. According to ICRA, luxury homes made up 34% of sales in Q1 FY26, up from 30% in FY24. A CBRE report showed the segment grew 85% year-on-year in the first half of 2025, with nearly 7,000 high-end residential units sold across the top seven cities. "Premium apartments remain dominant, with 3-4 BHK units now constituting 70% of value sold," said Puneet Gulati, analyst, Property & Infra, HSBC India. "In value terms, premium apartments accounted for 67% of sales in Q1, up from 59% in FY25. Even by area, they now make up 51% of the market." Crisil Ratings expects premium homes to account for 38-40% of new launches in 2025 and 2026. In contrast, affordable and mid-segments are likely to shrink to 10-12% and 19-20%, respectively, down sharply from 30% and 40% in 2020. Rising land and raw material costs have made these segments less viable for developers, tilting the market further toward luxury.
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