CLSA Sees Bright Future for Two Real Estate Stocks Despite Sector Challenges Post-Budget 2026

Global brokerage CLSA has expressed a constructive outlook for the real estate sector, particularly in light of the policy measures outlined in the Budget 2026. The brokerage believes that while some short-term challenges may arise, the long-term benefits for the sector are substantial.

After naming DLF and Embassy REIT as its top picks, CLSA highlighted several positive steps proposed by the government. These include greater clarity on taxes and compliance for global capability centres (GCCs), as well as a tax holiday for foreign companies setting up data centres until 2047. These measures are expected to provide significant support to the real estate sector, especially for companies focused on building annuity assets and monetizing land parcels for data centre development.

However, the brokerage also noted that the limitation on MAT (Minimum Alternate Tax) credits could weigh on earnings in the mid-term. Despite this, CLSA believes that the longer-term gains from the expansion of GCCs and data centres will more than offset this impact, making the overall policy direction positive for the segment.

The real estate sector has been facing various challenges, including regulatory changes and economic uncertainties. However, the policy measures in the Budget 2026 are seen as a significant step towards addressing these issues and fostering long-term growth. DLF and Embassy REIT, being two of the largest and most diversified players in the sector, are well-positioned to benefit from these policy initiatives.

CLSA's positive outlook is based on the potential for increased investment in GCCs and data centres, which are expected to drive demand for commercial real estate. The tax holiday for data centres, in particular, is seen as a major incentive for foreign companies to set up operations in India, thereby boosting the demand for office spaces and other commercial properties.

While the real estate sector has seen mixed performance in recent years, the policy measures announced in the Budget 2026 are expected to provide a much-needed boost. The clarity on taxes and compliance for GCCs is expected to attract more global companies to set up operations in India, which will, in turn, drive demand for commercial real estate.

In conclusion, despite the mid-term challenges posed by the limitation on MAT credits, the long-term benefits from the expansion of GCCs and data centres are expected to drive growth in the real estate sector. DLF and Embassy REIT, with their strong positions and diversified portfolios, are poised to benefit the most from these policy measures.