Realty rally may have peaked, go for stock-specific bets: Analysts

Synopsis

The real estate sector faces challenges as the Nifty Realty index underperforms the benchmark Nifty in 2025. FY25 witnessed a volume decline despite value growth, impacted by election-related project delays and launch drops, particularly in Hyderabad and Mumbai. While valuations remain high, analysts anticipate potential improvements in FY26 with resolved supply issues and expected lower home loan rates.

Mumbai: As a broad, sectoral investment theme, real estate may have already had its best run in the current upcycle with analysts suggesting specific stocks that provide growth and earnings comfort amid elevated valuations.

Nifty Realty index is down 8.5% in 2025 so far, compared with 7% gains for the benchmark Nifty. On Thursday, the realty index ended 0.7% lower. It has declined 4.5% in the last five trading sessions.

"In FY25, the real estate sector saw a 3% decline in volumes, even as value grew 10%. After years of strong momentum, the election year led to project approval delays and a 13% drop in launches, with Hyderabad and Mumbai more affected than NCR (national capital region) and Bangalore," said Pankaj Kumar, VP - fundamental research at Kotak Securities.

Kumar said while due to this, stocks of most listed players have corrected, valuations still aren't very comfortable in the sector.

However, some analysts said FY26 may be better in terms of business for these companies.

"With the supply-side issues largely resolved and lower home loan rates expected to boost demand, our outlook for the sector is cautiously positive. However, valuations still remain elevated for most companies," said Anil R, research analyst at Geojit Investments. Real estate companies like Anant Raj, Oberoi Realty, Godrej Properties, and Brigade Enterprises have declined 15-36% this year.

CYCLICAL PLAY?
Vipul Bhowar, senior director — head of equities at Waterfield Advisors, said the market is currently in the fifth year of the typical eight year real-estate cycle, and the most recent one began in 2020. “In the first four years, real estate stocks, along with cement and steel companies, tend to rally on new project launches. In the following four years, as projects near completion, investors often book profits and capital shifts to ancillary sectors such as tiles, plywood, paints, electrical goods and housing finance companies,” said Bhowar. The Nifty Realty index had gone up almost 81% and 34% in 2023 and 2024, respectively.

WHAT SHOULD INVESTORS DO?
Kotak’s Kumar said he remains positive on select names. “DLF has a strong launch pipeline and land reserves, and our fair value for the stock is `1,020. Macrotech has guided for 20% growth this year, we value it at `1,480. Prestige, after a weak FY25, is well-positioned to rebound as it has several launches lined up, and our fair value for the share is `1,700,” he said. Kumar’s targets imply an upside of 6-23% in these stocks. “While upside may be limited in the near term, these stocks can be added on dips,” he said. Anil R of Geojit prefers Brigade Enterprises and Prestige Estates for their stable rental income and robust FY26 launch pipelines. “We recommend investors consider booking profits in real estate stocks and reallocating to its ancillary segments,” said Bhowar.

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