Morgan Stanley Upgrades DLF, Prestige Estates; Downgrades Godrej Properties in Real Estate Sector

The real estate sector has experienced an 8% correction over the past 12 months, underperforming the Sensex, which gained 9% during the same period. This correction, driven by subdued pre-sales in the second half of fiscal year 2025 (H2FY25), led to a partial unwinding of excess net asset value (NAV) premiums.

Global brokerage firm Morgan Stanley believes this market reset presents a reasonable entry point for select real estate stocks. Despite recent underperformance, the brokerage maintains a positive long-term outlook, with sector fundamentals remaining intact.

Realty Stock Ratings and Targets

DLF : Morgan Stanley has upgraded DLF's rating from 'Equal-weight' to 'Overweight' on attractive valuation. The brokerage has revised its price target lower to ₹900 from ₹910 earlier. The foreign brokerage sees value in DLF due to its strong brand, extensive land bank, and net cash position, which provide margin protection and model sustainability. The brokerage forecasts a 13% compound annual growth rate (CAGR) in investment property revenue between FY24 and FY28.

Prestige Estates Projects : Rating upgraded from 'Equal-weight' to 'Overweight', and the price target has also been increased to ₹1,700 from ₹1,370 earlier. Prestige may see a robust recovery in pre-sales in FY26, growing 40% year-on-year, the strongest among peers. The company's leverage is now more manageable following its qualified institutional placement (QIP) and the potential listing of its hotel assets.

Godrej Properties : Rating downgraded from 'Overweight' to 'Equal-weight', and the price target has been lowered from ₹3,400 to ₹2,400. While growth prospects are expected to stay strong in FY26, Morgan Stanley warns this may come at the cost of margins and increased leverage if the company overspends on business development.

Oberoi Realty : The price target has been revised lower to ₹1,700 from ₹2,060 earlier.

Macrotech Developers : Price target has been revised higher to ₹1,400 from ₹1,230 earlier.

According to Morgan Stanley, India's real estate cycle remains intact, though it appears to be in a late stage. The brokerage continues to favour companies with stronger growth trajectories and has updated its NAV calculation model. Investors remain focused on growth and are likely to respond positively to pre-sales surprises. The top five listed developers are expected to post 15% year-on-year growth in pre-sales (compared to 18% in FY25 and 39% in FY24). Among these, Prestige Estates stands out with an expected 40% growth in FY26.