The Indian real estate market is on its way to recovery, with the residential real estate segment leading the way, according to a new Ernst & Young report. The demand for residential real estate has revived due primarily to improved affordability. Developers are focusing more on most projects, which are more salable, than on luxury developments. Improved liquidity, softening interest rates and price corrections have also contributed to the recovery.

Although India’s residential sector is improving, the commercial, retail and hospitality markets continue to struggle. The global economic slowdown has caused the IT sector and multinationals to halt expansion plans in the country. Analysts say that most retailers have put off their expansion plans in India due to the decline in their revenues and profitability. And developers have moved away from hospitality projects, which require a long period of time to complete.

The report names Delhi as the most preferred Indian destination for real estate developers and investors. Mumbai is a close second.  Key factors that help Delhi retain its top position are the fast-paced improvements in physical infrastructure, such as the metro railway and modernization of the international airport.