Real estate stocks face January chill as index sinks 10%; time to buy?

Nifty Realty index correction: The fall in real estate stocks 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

Profit booking in real estate stocks, which dragged the Nifty Realty index down 16.6 per cent in 2025, has extended into 2026.

 

So far in January 2026, the Nifty Realty index has slumped 10.2 per cent, with most constituents hitting 52-week lows. By comparison, the benchmark Nifty 50 index has slipped 3.7 per cent during the same period (until January 20).

 

Analysts credit the sustained weakness in real estate stocks to cyclical normalisation amid higher prices, lower launch activity, and an unfavourable base effect. The downtrend, they said, follows a two-year rally that saw the Nifty Realty index climb 34.39 per cent in 2024 and 81.34 per cent in 2023, prompting profit booking amid stretched valuations and broader market weakness.

 

 

A record exodus of foreign investors has also weighed on the high-beta sector, they added.

 

Divyam Mour, a research analyst at Samco Securities, said that despite developers reporting record presales in the third quarter (October–December/Q3) of 2025-26 (FY26), the fine print of quarterly results announced so far suggests growth is increasingly price-led rather than volume-driven, pointing to moderating demand.

 

“Rising residential prices have started to impact affordability, especially in mid-income segments, leading to cautious buyer behaviour,” he said.

 

Between 2019 and 2025, housing prices jumped 150 per cent in Gurugram, 115 per cent in Pune, 104 per cent each in Noida and Greater Noida, 98 per cent in Bengaluru, and 97 per cent in Mumbai, according to consultancy firm Square Yards.

 

According to a sector report by real estate consultancy Anarock, housing sales in the top seven Indian cities fell to 395,000 units in 2025, a decline of 14 per cent year-on-year.

 

Rising property prices, layoffs in the information technology sector, and buyer anxiety amid global uncertainties led to the moderation in sales, the report said.

 

Apart from elevated housing prices, analysts said the correction in stock prices reflects uncertainty ahead of the Union Budget 2026–27, as investors await clarity on potential changes to taxation, housing incentives, and interest rates.

 

Mour believes real estate stocks could continue to see volatility in the near term as expectations around Budget 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,” he said.

 

The sector, Mour added, may not see any immediate upside but is unlikely to enter a phase of prolonged pain.

 

Pankaj Kumar, vice-president for fundamental research at Kotak Securities, also remains positive on the medium-term outlook, citing comfortable inventory levels and strong balance sheets.

 

“Following the recent correction, valuations across most residential real estate stocks appear reasonable,” he said.

 

To navigate the current volatility, analysts recommend a selective and staggered approach rather than broad-based exposure.

 

“Preference should be given to companies with diversified portfolios, including meaningful rental or annuity income streams, as this provides earnings stability during demand slowdowns. Largecap developers with strong balance sheets and visibility on launches are better positioned to manage near-term volatility,” Mour said.

 

Kumar prefers Prestige Estates (fair value: ₹1,900), Lodha Developers (fair value: ₹1,455), and DLF (fair value: ₹1,020) for the long term.