HSBC's Top Real Estate Picks: Godrej Properties, DLF, and Others with Significant Upside Potential

Indian real estate stocks have underperformed despite robust operational performance from developers. However, HSBC believes patient investors could be rewarded as the sector moves closer to a phase of stronger cash-flow generation. The brokerage has retained its ‘Buy’ ratings on Godrej Properties, DLF, Prestige Estates Projects, Oberoi Realty, and Sobha, with implied upsides ranging from 25% to 68%.

HSBC notes that while the 16 developers under its coverage delivered around 20% compound annual growth in pre-sales over the past two years, real estate stocks declined 22% during the same period. The brokerage attributes this disconnect to reduced foreign investor participation, concerns over interest rates, a shift towards lower-beta sectors and technology-related themes, and the market’s increasing focus on free cash flow generation.

“We think FY28 will bring that sweet spot. Developers have been reducing their guidance for business development as they have built large future project pipelines. Pre-sales momentum remains, and large project completions are due in FY28. This is a sweet spot of FCF generation, which we think investors will like,” HSBC said.

Why HSBC Remains Positive on the Sector

HSBC maintains that the health of the residential property market remains strong despite concerns around geopolitical developments and rising construction costs. The brokerage points out that listed developers continue to operate with comfortable balance sheets and low leverage while maintaining strong sales momentum. It adds that unsold inventory levels remain manageable and developers continue to guide for healthy growth.

“Industry health remains good in the interim and we think existing investors will likely wait out till FY28. Listed companies all operate with comfortable balance sheets and low leverage, which allows developers to reduce their cost of borrowing,” HSBC said.

The brokerage also highlighted that most developers reported only a limited impact from the West Asia conflict, with construction costs rising by around 3-5% but without any significant effect on margins.

HSBC on Godrej Properties: ‘Buy’

HSBC retained its ‘Buy’ rating on Godrej Properties Ltd. with a target price of Rs 2,900, implying an upside of 67.6%. The brokerage noted that Godrej Properties delivered pre-sales of Rs 342 billion in FY26, up 16% year-on-year and the highest reported by any listed real estate developer in India. Management guided for pre-sales of Rs 390 billion in FY27, representing another 14% increase.

HSBC prefers Godrej Properties for its diversification and decentralised business model. “We prefer GPL for diversification and decentralisation,” HSBC said.

HSBC on DLF: ‘Buy’

HSBC maintained its ‘Buy’ rating on DLF Ltd. with a target price of Rs 920, implying an upside of 55.4%. The brokerage noted that DLF reported FY26 pre-sales of Rs 200 billion and guided for a similar level in FY27. The company remains focused on maintaining margins and execution quality rather than chasing volume growth.

HSBC said DLF’s investment appeal is supported by its annuity income stream, project quality, and strong balance sheet. “We prefer DLFU for annuity income support and project quality,” HSBC said. The brokerage also noted that DLF continues to operate with zero gross debt and a net cash position.

HSBC on Prestige Estates: ‘Buy’

HSBC retained its ‘Buy’ rating on Prestige Estates Projects Ltd. with a target price of Rs 2,000, implying an upside of 43.4%. The brokerage highlighted that Prestige reported FY26 pre-sales of Rs 300 billion, up 76% year-on-year. The company guided for 15-20% growth in FY27 and expects around Rs 580 billion of launches during the year following a strong business development pipeline.

HSBC prefers Prestige because of its project execution track record. “We prefer PEPL for strong project execution track record,” HSBC said.

HSBC on Sobha: ‘Buy’

HSBC maintained its ‘Buy’ rating on Sobha Ltd. with a target price of Rs 1,800, implying an upside of 29.3%. The brokerage said Sobha reported FY26 pre-sales of Rs 81 billion, up 30% year-on-year, and guided for another 30% growth in FY27. The company plans launches worth Rs 150 billion during the year.

HSBC finds Sobha attractive because of its turnaround potential following improvements in operating cash flow generation and debt reduction. “We prefer SOBHA for its turnaround potential,” HSBC said.

HSBC on Oberoi Realty: ‘Buy’

HSBC retained its ‘Buy’ rating on Oberoi Realty Ltd. with a target price of Rs 2,100, implying an upside of 25.4%. The brokerage noted that Oberoi reported FY26 pre-sales of Rs 54 billion and is preparing for significant launches in FY27, including projects in Gurugram and Adarsh Nagar.

HSBC prefers Oberoi because of its strong balance sheet and stable end-market exposure. “We prefer OBER for its strong balance sheet and stable end-market,” HSBC said.

Sector Valuations Have Lagged Operational Performance

HSBC said the current phase of the cycle has seen investors place greater emphasis on free cash flow generation rather than booking growth alone. The brokerage noted that aggregate pre-sales guidance achievement across the sector remained strong in FY26, with developers under its coverage delivering about 95% of their combined sales guidance. Launch execution also remained healthy, with companies achieving about 93% of combined launch guidance.

At the same time, the cohort of 17 developers tracked by HSBC reported 16% year-on-year growth in bookings during FY26, while maintaining manageable debt levels and comfortable inventory positions.

Conclusion

HSBC believes the real estate sector’s operational fundamentals remain significantly stronger than stock market performance suggests. While investor interest has weakened amid concerns around rates, geopolitics, and market positioning, the brokerage expects the next phase of the cycle to be driven by stronger cash-flow generation and project completions.