Real Estate Rally May Have Peaked: Analysts Recommend Stock-Specific Bets
The real estate sector faces significant challenges as the Nifty Realty index underperforms the benchmark Nifty in 2025. Despite a 10% growth in value, the sector saw a 3% decline in volumes, largely due to election-related project delays and a 13% drop in launches, particularly in Hyderabad and Mumbai. This has led to a correction in the stock prices of most listed players, with companies like Anant Raj, Oberoi Realty, Godrej Properties, and Brigade Enterprises experiencing declines of 15-36% this year.
Pankaj Kumar, VP - Fundamental Research at Kotak Securities, notes that while the sector has seen strong momentum in recent years, the election year has led to project approval delays and a significant drop in launches. He adds that while valuations remain high, the sector is not yet at a comfortable level for broad investment. However, some analysts are cautiously optimistic about the sector's outlook for FY26, anticipating potential improvements as supply-side issues are resolved and home loan rates are expected to decrease.
Anil R, a research analyst at Geojit Investments, suggests that the outlook for the sector is cautiously positive, but valuations remain elevated for most companies. He recommends specific stocks for their stable rental income and robust FY26 launch pipelines, including Brigade Enterprises and Prestige Estates.
Vipul Bhowar, Senior Director and Head of Equities at Waterfield Advisors, explains that the market is currently in the fifth year of the typical eight-year real estate cycle, which 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 shift their capital to ancillary sectors such as tiles, plywood, paints, electrical goods, and housing finance companies.
Kotak’s Kumar remains positive on select names, recommending DLF for its strong launch pipeline and land reserves, with a fair value of ₹1,020 per share. He also values Macrotech at ₹1,480 and Prestige at ₹1,700, indicating an upside of 6-23% in these stocks. Bhowar advises investors to consider booking profits in real estate stocks and reallocating to ancillary segments for better returns.
In summary, while the real estate sector faces challenges, analysts recommend specific stock picks for growth and earnings comfort. Investors should focus on companies with strong launch pipelines and stable rental income, such as DLF, Macrotech, and Prestige Estates, and consider reallocating to ancillary sectors for better returns.
