The Indian residential furniture sector is undergoing a transformative shift from traditional handmade furniture to modular systems, driven by rapid urbanization, evolving consumer preferences, and technological advancements in design and production. This study investigates the extent and impact of this transition in Pune, a Tier-2 city that has both traditional and contemporary lifestyles. Utilizing a mixed-methods approach, data triangulation method was used from surveys (157 respondents), interviews with stakeholders—including artisans, architects, interior designers, and furniture manufacturers—and a market review in literature. Findings reveal younger, urban consumers favor modular furniture for its affordability, quick assembly, and space efficiency, while older and high-income users continue to value the craftsmanship and durability of handmade products. Despite modular furniture’s dominance in kitchens and wardrobes, challenges persist around durability and limited personalization. Whereas, handmade furniture faces barriers of cost, production time, and limited accessibility to artisan workforce. Thematic analysis strongly stresses on the emotional value and cultural significance of handmade furniture, in comparison with the utilitarian appeal of modular furniture. The most important excerpt is that, both consumer and industry respondents incline and propose a need for a hybrid model that integrates the artistic value of traditional methods with the efficiency and scalability of modular design. This study contributes to design by highlighting the potential of such hybrid systems to integrate sustainability, customization, and urban living needs in India’s rapidly modernizing interiors market.