Real Estate Stocks Struggle in 2025: Is a Rebound on the Horizon?
Despite the RBI's rate cuts, real estate stocks have underperformed in 2025, leading to significant losses for investors. Analysts recommend caution in the short term but see potential for long-term growth.
Real Estate StocksRbi Rate CutsNifty Realty IndexHousing DemandInvestor SentimentReal Estate NewsSep 18, 2025
The Nifty Realty index has slumped nearly 14 percent so far in 2025 (till September 15), in stark contrast to the 6 percent gain in the benchmark Nifty50 index. Among individual stocks, Anant Raj has declined 31.08 percent, Oberoi Realty 29.05 percent, Godrej Properties 26.9 percent, and Brigade Enterprises 21.95 percent. Additionally, Lodha Developers has fallen 14.5 percent, DLF 5.96 percent, and Prestige Estates 5.89 percent. Raymond Realty, which listed on July 1 after its demerger from Raymond, is down 35.17 percent since then.
The sharp decline in stock prices reflects a trend reversal in the sector after a multi-year rally. The Nifty Realty index climbed 34.4 percent in CY-24 and 81.35 percent in CY-23. By comparison, the benchmark Nifty index added 8.8 percent and 20 percent in the respective years. Sticky input costs and demanding valuations have also turned investors cautious on the sector.
According to Ravi Singh, senior vice president of retail research at Religare Broking, raw material costs, including cement and steel prices, remained stubborn in 2025, squeezing margins. This affected housing demand, especially in mid-income and tier-2 cities. Investor confidence has waned as sales volumes fell for 12 straight months between June 2024 and May 2025, with growth limited to Chennai and NCR. Soaring prices have hit affordability, narrowing demand to premium/luxury homes.
Separately, some names had their own problems after corporate events: Raymond's post-demerger listing, profit pressure at Oberoi and Godrej Properties, and a sharp fall in Anant Raj made sentiment worse. G Chokalingam, founder and head of research at Equinomics Research, added that valuations of real estate stocks had become unsustainable, leading to a severe correction in their stock prices in the subsequent overall recovery in markets.
Among individual stocks, Prestige is trading at 44.9x 12-month blended forward PE, while Phoenix trades at 39.9x, both above their five-year averages. With concerns around steep appreciation in land prices triggering demand slowdown fears, analysts suggest investors stay cautious on the pack.
Full transmission of rate cuts by the RBI, along with a better-than-expected festive season sales in the second/third quarter of the current FY (Q2/Q3FY26) could prompt traders into buying related stocks. Policy nudges such as tax incentives or support for affordable housing generating sales, too, would help the sentiment. Short of these, the sector may drift sideways for a while.
Amid stretched valuations and slowdown concerns, analysts advise investors to cherry-pick select stocks with low debt-to-equity ratios, experienced management, and meaningful land banks. Singh recommends focusing on large, well-capitalised players such as DLF, Godrej, and Prestige, along with Phoenix for commercial exposure. Sobha, he noted, offers relatively attractive valuations for patient investors.
Avoid or trim high-beta, execution-risk names like Raymond Realty and Anant Raj until their balance sheets and sales recover, he suggested. Nuvama picks Prestige and Brigade Enterprises (each 'Buy') as its top picks, while JM Financial prefers Godrej, Sobha, and Keystone Developers.
Over the long-term, analysts believe India's urbanisation, rising incomes, and preference for branded, reliable builders bode well for a structural growth in housing demand. The sector looks like a long-term play from a three-five year horizon.
Frequently Asked Questions
Why have real estate stocks underperformed in 2025 despite RBI rate cuts?
Real estate stocks have underperformed due to sticky input costs, such as cement and steel prices, which squeezed margins. Additionally, sales volumes fell for 12 months, and high valuations turned investors cautious.
Which real estate stocks have seen the biggest declines in 2025?
Anant Raj, Oberoi Realty, Godrej Properties, and Brigade Enterprises have seen significant declines, with Anant Raj down 31.08 percent and Oberoi Realty down 29.05 percent.
What factors are affecting housing demand in 2025?
Housing demand is affected by soaring prices, which have hit affordability, especially in mid-income and tier-2 cities. Sales volumes have also fallen for 12 straight months.
What do analysts recommend for investors in the real estate sector?
Analysts advise investors to focus on large, well-capitalised players with low debt-to-equity ratios, experienced management, and meaningful land banks. Stocks like DLF, Godrej, and Prestige are recommended.
What is the long-term outlook for the real estate sector in India?
The long-term outlook is positive, driven by urbanisation, rising incomes, and a preference for branded, reliable builders. The sector is seen as a long-term play from a three-five year horizon.
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