Real estate stocks burn investor pockets in 2025; is rebound on the cards?

Real estate sector/stocks: The Nifty Realty index has slumped nearly 14 per cent so far in 2025 (till Sept 15), in sharp contrast to the 6 per cent gain in the benchmark Nifty50 index.

Despite the Reserve Bank of India (RBI) cutting rates, cumulatively by 100 basis points (bps), all through calendar year 2025 (CY-25), real estate stocks have failed to generate returns for investors. In fact, the sector has been the second worst performing sectoral indices of CY-25, after IT, ACE Equity data shows.

 

The Nifty Realty index has slumped nearly 14 per cent so far in 2025 (till Sept 15), in sharp contrast to the 6 per cent gain in the benchmark Nifty50 index.

 

Among individual stocks, Anant Raj has declined 31.08 per cent, Oberoi Realty 29.05 per cent, Godrej Properties 26.9 per cent, and Brigade Enterprises 21.95 per cent. Further, Lodha Developers has fallen 14.5 per cent, DLF 5.96 per cent, and Prestige Estates 5.89 per cent. Raymond Realty, which listed on July 1 after its demerger from Raymond, is down 35.17 per cent since then.

 

 

The sharp decline in stock prices of real estate stocks, as per analysts, reflects a trend reversal in the sector after a multi-year rally. The Nifty Realty index climbed 34.4 per cent in CY-24 and 81.35 per cent in CY-23. By comparison, the benchmark Nifty index added 8.8 per cent and 20 per cent in the respective years.

 

That apart, sticky input costs, and demanding valuations, too, 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, stayed stubborn in 2025, squeezing margins. This also 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 to May 2025, with growth limited to Chennai and NCR, according to Nuvama Institutional Equities. 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," Singh added.

Valuation woes

 

Meanwhile, 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 to 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,” Singh said.

 

Those at Nuvama added that the breadth of the housing cycle, product mix, and interest rate cuts shall determine stock performance hereon rather than pre-sales growth. "Real estate stocks can remain range-bound if cyclicals continue to be out of favour," it said in a recent sector report.

Real Estate Stocks Investment advice: Caution in near-term, bullish on long-term

 

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.

 

That said, 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, they said, looks like a long-term play from a three-five year horizon.