Rate Cuts May Revive Indian Real Estate Stocks in 2026: Bernstein's Garre

Venugopal Garre, Managing Director and Head of India Research at Bernstein, has a selective but optimistic view on the Indian real estate sector for 2026. According to Garre, the macroeconomic environment remains stable, and the economy is not on the brink of collapse, although growth momentum is fading and upside potential is limited. Bernstein projects an 8% upside for the Nifty, with a target of 28,100.

Garre sees a potential turnaround in Indian real estate stocks in 2026, upgrading the sector from its earlier underperform rating. He describes this as a catch-up opportunity after a weak 2025. Property cycles typically last six to seven years, and with stock prices having undergone a sharp correction, the sector is well-positioned for a recovery as interest rates ease.

As rates continue to moderate, Garre expects another 50-basis point rate cut this year. Lower borrowing costs could provide incremental support to real estate demand and valuations. Despite this selective optimism, Garre has adopted a non-consensus stance on the broader Indian equity market for 2026, downgrading it to ‘neutral’. He argues that growth momentum is fading and upside potential is limited.

Garre expects India’s gross domestic product (GDP) growth, which has peaked at around 8%, to moderate to about 6.5% over the coming quarters. He notes that the onus of sustaining expansion will increasingly fall on the private sector, which may not yet be fully prepared to take on that role. Valuations are another key constraint. Garre believes that the expected recovery in earnings growth is already reflected in current market prices.

Policy support is likely to be limited, with a constrained government balance sheet and persistent fiscal deficit concerns reducing the scope for meaningful state-led stimulus. On the monetary side, Garre expects only modest easing from the Reserve Bank of India (RBI), with rate cuts of around 50–75 basis points, which he does not see as sufficient to materially boost growth.

Within sectors, Bernstein has turned cautious on consumer staples. While volume growth may inch up, it is unlikely to be meaningful enough to drive strong returns. Rising competition from quick-commerce platforms, which have raised large amounts of capital and are giving smaller brands greater visibility, potentially erodes the dominance of established players. Combined with uncertainty around the monsoon, rural demand, and expensive valuations, this makes it “very hard to take a proactive positive view at the beginning of the year.”

On external factors, Garre expects an India–US trade deal to be signed within the next few months but views it as a short-lived sentiment driver rather than a durable catalyst for foreign direct investment or manufacturing. He believes long-term benefits would require India to be unambiguously aligned with the US, which he does not currently see. As a hedge to this event-driven optimism, Bernstein is overweight in IT services.

Garre also struck a cautious note on artificial intelligence (AI), saying India is “way far behind” in real-world AI implementation outside technology companies. He sees AI as a long-term theme but does not expect it to deliver significant efficiency gains or margin improvements over the next 24 months.

Despite the neutral market stance, Garre emphasised that Bernstein remains constructive on select areas, maintaining overweight or mild overweight positions in financials, telecom, consumer tech, IT, and real estate. He concluded by stating that the broader economy remains stable and that strong IPO and fundraising activity should continue to provide investors with fresh opportunities.