Residential Absorption vs New Supply in India: Is the Market Heading for a Shortage?

If you’ve been monitoring the headlines for the residential market recently, you’ve likely noticed the pattern: Buyers are back with vigor, but new supply isn’t always keeping up.

At the overall level, the data already shows signs of a tightening trend. In Q3 2025, PropEquity numbers registered 1,00,370 sales in the top nine cities in the country, compared to 92,229 new launches. This is a period where demand has marginally pulled ahead of supply.

Focus on Bengaluru and the picture becomes complex. The city recorded 15,100 unit sales in Q2 2025, and there were 58,900 units of inventory left unsold (approximately 12 months of inventory). South Bengaluru (Hosur Road/Electronic City influence zone) saw some momentum.

Is the housing supply demand in India destined for a genuine shortage or just a tightly competitive marketplace? It’s time to provide a property marketplace analysis and what this all means to prospective homebuyers and investors planning for 2026.

Absorption Rate vs New Launches

Imagine the market like a tank of water.

New construction launches are the tap. These contribute residential real estate supply to the pipeline. Absorption is the output flow. It refers to the number of properties that are actually sold during a certain time period.

Real estate absorption rate: This measures how quickly the supply of inventory is being absorbed (also referred to as "sales velocity" and "months of inventory/overhang").

When absorption exceeds new supply on a consistent basis, the level of the tank falls. One can have an adequate supply throughout the city. However, certain routes (because of quality job and mobility investments) tend to start feeling the squeeze.

Current Supply vs Demand Across Cities

On a macro level, the current scenario of housing supply demand in India appears well-balanced on paper but uneven.

Top 7 cities

ANAROCK’s Q3 2025 data reports:

What this table is quietly telling you

Demand is leading supply in places like MMR, NCR, and Hyderabad (sold units higher than launches), which is where “tightness” can show up faster, especially in high-demand pockets.

Bengaluru is close to balanced, with launches and absorption nearly matching, 15,200 launches vs 14,850 sold units, suggesting healthy demand without a headline-level shortage, but still tight in the right corridors and configurations. Housing.com lists the average price in Electronic City at Rs.7,426/sq ft, which still reads as relatively accessible versus many premium-heavy pockets.

Why Inventory Is Shrinking in Key Metros

Demand has shifted

Across many large cities, buyer intent has strengthened due to stable end-user demand, better project trust post-RERA, and a preference for homes that fit lifestyle needs (bigger sizes, better amenities, stronger locations). This shows up in how launches and sales are moving closer to parity nationally, and in some cities, sales are still running ahead of new supply.

Supply is coming, but not always in the right micro-markets

India isn’t running out of housing everywhere. What tightens first is residential real estate supply in:

• job-heavy corridors,
• transit-upgraded belts,
• and neighbourhoods with mature social infrastructure.

That’s exactly how a city can look “balanced” in total inventory, but still feel tight on the ground for ready-to-move / well-located options.

Bengaluru’s twist

Bengaluru is a great example of a market that’s not uniformly short, yet specific pockets can tighten quickly.

ANAROCK’s Bengaluru Q2 2025 report places the city’s inventory overhang at 12 months, indicating supply is present, but not excessive. Moneycontrol’s summary of the same ANAROCK data puts Bengaluru’s unsold inventory at 58,900 units around that period.

Now layer in the demand engine: Bengaluru’s office market remains active. And Electronic City specifically continues to attract large occupier commitments, like the reported 1.4 million sq ft TCS lease in Electronic City. 

That’s why property demand trends in India can feel especially “tight” in Bengaluru’s growth corridors (including the Electronic City influence zone), even if the city-wide inventory doesn’t scream shortage.

Construction Slowdowns and Regulatory Bottlenecks

Here are the biggest friction points that can slow residential real estate supply:

Municipal approval lag

In Bengaluru, approvals are a real-world bottleneck because without plan sanctions, commencement certificates, and occupancy certificates, projects can’t move cleanly from one stage to the next.

A BusinessLine report noted that approvals for mid-stage projects and new launches were facing delays after BBMP’s restructuring, with “temporary disruptions to building plan clearances and project approvals.”

For buyers tracking housing supply demand in India, this matters because even when demand is strong, the city can’t respond with fresh supply at the same speed. 

Compliance/documentation rules

Regulatory tightening can be good for buyer safety, but it can also slow new supply in the short term.

• In October 2024, reports said BBMP rejected nearly 2,000 building plan approvals tied to a rule requiring local planning authority approval, highlighting how compliance checks can suddenly stall approvals at scale. 
• From July 1, 2025, BBMP made e-Khata/ePID mandatory for online building plan approvals, as part of integrating the approvals system with the e-aasthi database to verify ownership/tax records. 

These changes strengthen governance, but in the transition phase, they can slow the flow of new approvals. 

Environmental clearance uncertainty

Environmental approvals can become a silent schedule-killer. In a legal update tied to the Supreme Court’s handling of the Vanashakti-related clarity, CREDAI was quoted as saying environmental clearance delays can add nearly two years to project timelines. 

In a separate report on the same period, Economic Times noted that clarity from the Supreme Court could help revive 493 stalled housing projects and unlock 70,000+ homes (example from MMR/Pune). This is a reminder of how regulatory uncertainty can freeze supply even when demand exists.

That’s a big driver behind why housing supply demand in India can feel tight in specific metros even if “India overall” isn’t out of housing.

Impact of Demand-Supply Gap on Property Prices

When demand starts running ahead of fresh supply, even for a few quarters, pricing usually responds in a predictable way. 

In any property market analysis, the simplest chain is:

Higher real estate absorption rate → shrinking available inventory → less negotiating room → upward pressure on prices

ANAROCK’s pan-India view for the top 7 cities shows average residential prices rose 9% YoY, from Rs.8,390/sq ft (Q3 2024) to Rs.9,105/sq ft (Q3 2025). That’s not a runaway spike, but it’s consistent with a market where unsold inventory in India has stopped ballooning and is instead getting absorbed at a steady clip.

Bengaluru is a good example of how price growth can happen even without a dramatic headline, “housing shortage in India.” In Q3 2025, Bengaluru’s average price was cited at Rs.8,870/sq ft, and it also saw a notable YoY rise in average prices in broader city comparisons. ANAROCK’s Q3 2025 summary also notes Bengaluru registered 10% YoY price growth (among the higher-moving markets in that quarter’s comparison set). 

In short, tightening housing supply demand in India doesn’t always create a dramatic nationwide shortage. But it does create pricing pressure in the specific cities and corridors where demand is deepest and inventory is shrinking the fastest. Bengaluru is a prime example, and Electronic City is a strong micro-market lens within that.

What This Means for Buyers and Investors in 2026

2026 is likely to be about selection because the housing supply demand in India is tightening in specific cities, segments, and corridors (even if it doesn’t look like a nationwide shortage on a single chart).

For buyers

1. Shortlist corridors where demand is structurally sticky. Bengaluru continues to show active south-belt momentum (Hosur Road influence), and corridor-level trackers still show Electronic City as relatively accessible.
2. Prioritise “deliverability”. In a market where supply is calibrated and compliance is tighter, project credibility matters more. This is where choosing a developer with a strong Bengaluru footprint, like Puravankara, can reduce execution risk, especially if you’re buying for end-use.
3. Expect premiums for homes that match today’s preferences. With premiumisation rising nationally,      well-planned projects with good connectivity and liveability can price in faster than the city average.

For investors

1. Watch the real estate absorption rate vs launches. The market is increasingly balanced at the top level, but where absorption edges ahead (or where supply is skewed premium), rents and prices tend to firm up sooner.
2. Check for misaligned inventory. “Unsold” doesn’t always mean weak demand; sometimes it’s a mismatch of ticket size, unit mix, or micro-location. So instead of panicking about unsold inventory in India, compare what’s available in your segment to the incoming pipeline in that same segment.
3. Buy where supply is hard to replicate. If approvals, land, or infrastructure constraints limit fresh residential real estate supply in a corridor, that’s where the “soft” version of a housing shortage in India shows up first.

Final Take

So, is India heading for a shortage? The honest answer is no, not everywhere, not in every segment, but in the corridors and configurations people actually want, the market is definitely getting tighter. 

Bengaluru is a good example of this “selective tightness.” City-wide inventory may still look manageable, but demand-led pockets, especially employment-linked, transit-improving belts like the larger Hosur Road/Electronic City influence zone, can feel constrained when the right kind of supply is limited or skewed premium. 

And in a market where timing and deliverability matter more than ever, choosing established developers with a strong track record like Puravankara becomes a practical way to reduce execution risk while staying aligned with where real end-user demand is moving.

Frequently Asked Questions

What exactly is the “absorption rate” in real estate?

The absorption rate is a simple demand-speed metric. It tells you how quickly homes are getting sold in a market over a period (month/quarter). When absorption stays high while launches slow, the housing supply demand in India balance tightens, and buyers typically see fewer deals and faster sell-outs.

Is India actually heading toward a housing shortage?

Not uniformly, but parts of the market can feel tight. In Q3 2025, ANAROCK reports the top 7 cities saw 96,700 new launches vs 97,100 units sold, i.e., near parity. Where “shortage-like” conditions show up first is in specific micro-markets and segments (with good connectivity, job access, and liveability) where demand is deeper than incoming sellable supply.

What’s happening to unsold inventory in India?

Inventory is trending tighter compared to earlier cycles. ANAROCK’s Q2 2025 pan-India report highlights that available inventory across the top 7 cities fell 3% YoY to 5.62 lakh units, indicating unsold inventory in India is not expanding the way it used to during slowdowns. 

What does housing shortage mean for Bengaluru?

Bengaluru is a “healthy” market, but it can still feel tight in the right belts. For Electronic City specifically, Housing.com reports an average price of Rs.7,426/sq ft, and also flags a strong YoY increase, signalling active demand in that micro-market.

How to tell if a “shortage” is real in the micro-market? 

A practical way to judge the housing supply demand in India situation at a micro-market level is to track three indicators together:

• How long would unsold stock last at current sales pace? If this keeps falling, the market is tightening.
• Absorption vs new launches in that specific corridor (not just the city average).
• Supply mix (what kind of homes are getting launched).