After a bruising year, can December rate cut lift mood in lagging realty stocks?

Realty stocks slump even as rate cuts deepen, but analysts spot early signs of a turnaround

Real estate stocks have scorched investor portfolios this year despite the Reserve Bank of India (RBI) delivering a cumulative 100-basis-point rate cut. The sector, which had enjoyed a multi-year rally until recently, has emerged as the worst performer of 2025. Now, with expectations of another rate cut in December and a broadly healthy quarterly earnings season, analysts believe the tide may finally begin to turn.

A year of sharp corrections

Shares of major listed developers - DLF, Godrej Properties, Lodha Developers, Oberoi Realty, Prestige Estates, Sobha, Sunteck Realty and Brigade Enterprises have fallen as much as 35 percent this year. Even the Nifty Realty index has dropped around 15 percent, sharply underperforming the broader market.

According to Shobhit Agarwal, CEO of ANAROCK Capital, the slump can be traced to three clear pressures: regulatory overhangs, especially delays in project approvals, liquidity constraints and stretched balance sheets, prompting developers to slow down new launches, and excessive price escalation, a consequence of the post-pandemic housing boom.

These factors have eroded affordability, leading to a 12 percent decline in housing sales in the first nine months of 2025. Demand has increasingly narrowed toward premium and luxury homes, which now account for nearly 60 percent of total sales.

Is it time for contra bet?

The correction has dragged developer valuations well below their multi-year averages. DLF trades at 34x its price-to-earnings ratio versus a five-year average of 58x, Oberoi Realty is at 18x, down from its historical 26x, and Sobha has dropped sharply to 32x, compared to a five-year average of 111x.

For market watchers, this reset could offer a window of opportunity.

Market veteran Sunil Subramaniam believes realty stocks now offer an attractive “contra pick.” He says the upcoming December rate cut, combined with GST reductions on cement and building materials, could improve developer margins. Lower home-loan EMIs would also support affordability and revive sentiment.

Additionally, Sebi’s move to classify REITs as an equity asset class is expected to improve mutual fund participation in the real estate space — a structural positive for the ecosystem.

The sector’s Q2FY26 performance has been broadly encouraging. Developers such as Prestige Estates, Macrotech Developers (Lodha) and Sunteck Realty delivered strong all-round numbers. Meanwhile, Sobha and Oberoi Realty reported margin pressure due to higher input costs, and DLF and Godrej Properties posted mixed results.

Even so, the festival-driven momentum has helped reinforce expectations of a demand revival into the second half of the year.

Analysts at Emkay Global noted a clear improvement in inventory visibility across the real estate universe, helped by a steady build-up in business development. It expects Sunteck Realty to clock 25–35 percent pre-sales CAGR over FY25–28, Oberoi Realty to deliver 18 percent CAGR, and Lodha to maintain a 16 percent CAGR despite operating from a higher base.

Among stock picks, Emkay highlighted Sunteck as their preferred midcap bets, noting they currently trade at a 10–20 percent discount to NAV. For large caps, the brokerage favoured Lodha, backed by its strong launch pipeline, diversification strategy and consistent business development.

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