Real Estate Stocks Face January Slump: Is It Time to Buy?

Profit booking in real estate stocks, which dragged the Nifty Realty index by 16.5 per cent in calendar year 2025 (CY25), has extended into CY26 as well.

Thus far in January 2026, the Nifty Realty index has slumped 9.5 per cent, with most index constituents hitting 52-week lows. By comparison, the benchmark Nifty50 index has slipped 3.4 per cent during this period (till January 20).

Analysts attribute this sustained weakness in the stocks of real estate companies to cyclical normalisation, amid higher prices, lower launch activity, and an unfavorable base effect. The downtrend, they explained, also comes after two years of rally that saw the Nifty Realty index climb 34.39 per cent in 2024 and 81.34 per cent in 2023, prompting investors to book profit amid stretched valuations and broader market weakness.

Besides, the record exodus of foreign investors has dragged this high-beta sector, they said. Divyam Mour, research analyst at SAMCO Securities, noted that despite real estate developers reporting record pre-sales in the third quarter of fiscal 2025-26 (Q3FY26), the fine print of the quarterly results, announced so far, suggest that growth is increasingly price-led rather than volume-driven, indicating moderation in demand.

Rising residential prices have started to impact affordability, especially in mid-income segments, leading to cautious buyer behaviour. Notably, between 2019 and 2025, housing prices zoomed by 150 per cent in Gurugram, 115 per cent in Pune, 104 per cent in Noida and Greater Noida each, 97 per cent in Mumbai, and 98 per cent in Bengaluru, as per consultancy firm Square Yards.

That apart, as per a sector report by real estate consultancy firm Anarock, housing sales fell to 3.95 lakh units in the top seven Indian cities in 2025, registering a decrease of 14 per cent year-on-year.

Apart from pinching housing prices, analysts said the correction in stock prices reflects the uncertainty in the sector ahead of the Union Budget 2026-27, as investors await clarity on any potential changes to taxation, housing incentives, or interest rates. Mour of SAMCO Securities believes real estate stocks could continue to witness volatility in the near-term as expectations around Budget-related announcements and interest-rate trajectories get priced in.

Select stocks may continue to see time-wise or mild price-wise correction. However, fundamentals for large listed developers remain intact and the correction offers a more reasonable entry point for long-term investors. The sector, Mour added, may not see any immediate upside, but is not eyeing a phase of prolonged pain either.

Pankaj Kumar, vice president for fundamental research at Kotak Securities, remains positive on the medium-term outlook, citing comfortable inventory levels and strong balance sheets. For those looking to navigate the current volatility, analysts suggest a selective and staggered approach rather than a broad-based exposure to the sector.

Preference should be given to stocks of companies with diversified portfolios, including a meaningful rental or annuity income stream, as this provides earnings stability during demand slowdowns. Large-cap developers with strong balance sheets and visibility on new launches are better positioned to navigate near-term volatility. Kumar of Kotak Securities prefers DLF (fair value: ₹1020), Prestige Estates (fair value: ₹1,900), and Lodha Developers (fair value: ₹1,455) for the long-term.