Residential sales in India’s seven major cities are projected to decline by up to 3 per cent year-on-year in FY26 to 620–640 million square feet (msf), amid a moderation in sales velocity, according to ratings agency Icra.In FY25, sales stood at 643 msf, down 8 per cent YoY, following a sharp contraction in new launches and moderated demand in the affordable and mid-income segments. This slowdown came after the sector posted a robust compound annual growth rate of 26 per cent in area sales between FY22 and FY24.Icra noted: “Having seen a strong upcycle, the sector entered an equilibrium phase in FY25, which is expected to continue into FY26.”Affordability remains under pressure, with average selling prices (ASPs) rising over 10 per cent annually between FY23 and FY25. ASPs are expected to increase a further 6–8 per cent in FY26, driven by higher luxury sales, limited inventory, and increased pricing power among large listed developers. The years-to-sell (YTS) ratio is estimated to remain healthy at 1.0–1.1x by March 2026.On the supply side, new launches are projected to grow 4–7 per cent in FY26 to 630–650 msf, recovering from a 14 per cent decline last year. The growth will be supported by spillover projects and comfortable unsold inventory. Anupama Reddy, Co-group Head and Vice President – Corporate Ratings at Icra, said: “The calibrated launches by developers helped maintain healthy inventory levels despite moderation in sales.”Industry consolidation is accelerating, with listed developers’ share of total sales value rising to 20 per cent in FY25 from 13.1 per cent in FY20. Reddy added that these players are expected to continue outperforming the broader market, supported by lower leverage, strong collections, and robust cash flows.Debt levels may rise slightly in FY26 to support construction and expansion, but leverage is expected to remain manageable, aided by steady receivables and progress in ongoing projects, Icra noted.