India's Stock Market Surge Fuels Real Estate Boom Through Wealth Effect: Motilal Oswal
The surge has been led by a boom in luxury housing, signaling a structural shift in demand patterns.
A sharp rise in stock market wealth is driving real estate demand in India, with luxury housing emerging as the biggest beneficiary, according to Motilal Oswal’s 30th Annual Wealth Creation Study.
The report highlights the “Wealth Effect,” a behavioral economics concept that explains how consumers spend more as the value of their assets—such as stocks and property, rises. This spending boost occurs because people feel financially secure and confident, even if their income remains unchanged. Conversely, falling asset values can dampen confidence and consumption.
While the Wealth Effect is widely studied in the US, where over 60% of citizens own stocks, its influence is increasingly visible in India. The report notes that the realty sector has been a direct beneficiary of this phenomenon, with its recovery over the past five years coinciding with a strong stock market rally. The surge has been led by a boom in luxury housing, signaling a structural shift in demand patterns.
Post implementation of the Real Estate (Regulation & Development) Act (RERA), the sector has witnessed significant consolidation. Larger, more credible developers are gaining market share, further strengthening the industry’s fundamentals. Housing prices have been steadily rising, which, combined with high operating leverage, is expected to boost profitability for real estate companies.
The report also points out that sustained Wealth Effect in the “Make in India” and technology-driven era will continue to support the realty sector’s resurgence. Improved consumer confidence, higher disposable wealth, and preference for premium properties are shaping the next phase of growth.
Although precise measurement of Wealth Effect remains challenging, studies in the US estimate that for every $1 increase in asset value, consumers spend an additional 2 to 6 cents. Applied to India’s context, this behavioral trend underscores why equity market gains are translating into higher real estate investments, especially in urban and luxury segments.
India's housing market continues to demonstrate remarkable resilience and depth. A report from real estate consulting firm Anarock said 20% growth in sales value expected in FY26 with not more than 4% growth in sales volume reflects sustained end-user demand, higher pricing in key micro-markets, and a growing preference for larger and premium homes.
