Why Real Estate Stocks Are Struggling in 2026
The Nifty Realty index is the worst performer among NSE sectoral indices so far in 2026, down 24%, as fears of slowing housing demand trigger a sell-off in realty stocks.
A key driver is the Indian technology sector, which has historically powered housing sales and office space absorption. That engine now looks uncertain. Artificial intelligence-led disruption to IT business models and job creation is raising concerns that weaker hiring could spill over into both commercial and residential demand, especially in IT hubs such as Bengaluru, Hyderabad, and Pune.
Macro risks are compounding the pressure. The second-order effects of the West Asia war could push inflation higher, keeping prospective homebuyers on the sidelines. Affordability was already under strain after sustained price hikes, driven by rising construction costs even as demand held up.
Early signs of a slowdown are emerging. Housing sales in the top seven cities fell 7% sequentially in the March quarter of calendar year (CY26), according to Anarock Property Consultants. The decline coincides with many West Asian buyers, traditionally significant investors in Indian real estate, pausing purchases amid geopolitical uncertainty, the consultancy said.
Investment activity has also weakened: institutional inflows into residential assets fell 53% sequentially and 59% year-on-year to $0.2 billion in Q1CY26, according to property consultant Vestian.
For now, listed developers are expected to sail through the March quarter (Q4FY26) with decent pre-sales, aided by new launches. But FY27 pre-sales or bookings trajectory could come under pressure if the war continues for longer. A high base effect could make attaining strong incremental pre-sales growth challenging.
Jefferies India has estimated a 10-15% pre-sales growth in Q4FY26 for realty companies under its coverage, thus taking FY26 pre-sales growth to above 20%. Channel checks by Jefferies suggest only a limited impact on residential sales from the Iran conflict so far.
However, if the conflict is not fully resolved in the next two-four weeks, it may drive a potentially conservative pre-sales growth guidance across the board. “We believe median growth guidance of 10-15% in FY27E, with Lodha Developers likely at the upper end,” said the Jefferies report on 24 March.
On the supply-side, the pace of new launches has improved with approval-related challenges easing in key cities. Godrej Properties, Prestige Estates Projects, Sobha Ltd, and Macrotech Developers had a strong launch pipeline in Q4FY26, while new launches of Oberoi Realty and DLF have shifted to Q1FY27. New launches are likely to remain skewed towards the premium and luxury housing segment that enjoys relatively higher realizations and gross margins, boosting collections. However, aggressive supply in a weakening demand environment risks skewing the demand-supply balance and capping price growth.
Balance sheets, for now, offer some cushion. Collection trends have been strong for many, and debt levels are under control, allowing developers to expand into new geographies as business development activities remain robust. But with the post-pandemic surge fading, sustaining pre-sales growth will be critical for stock performance.
Crisil Ratings has said that the Indian residential market is entering a phase of calibrated growth after a sharp post-pandemic run. Sector value grew at a compounded annual growth rate of 26% between FY22 and FY25, but is estimated to have slowed to 5-7% in FY26 as volumes stagnated. For FY27, Crisil expects growth to ease further to 4-6%, with demand likely to remain largely flat at 0-2%.
