Real estate shares fall for 5th day, extend losses to 6%; analysts say 'valuations far ahead of fundamentals'

The shares of real estate companies extended losses on November 24, pushing the Nifty Realty index down more than 2 percent to close in the red for the fifth consecutive session. Analysts have listed out possible reasons behind the sharp downturn in the sector, and what lies ahead.

The Nifty Realty ended the session at 887, emerging as one of the top sectoral losers on the stock markets today. The sectoral index fell more than 6 percent over the past five sessions.

Why are real estate stocks falling?

Real estate stocks are not falling because the sector has weakened, but because valuations simply ran too far ahead of fundamentals, said Shiv Garg, Director, Forteasia Realty. "Many developers doubled in 12–18 months, and now the market is unwilling to pay premium multiples without fresh triggers. Investors are rotating profits into sectors where earnings visibility is stronger," he said.

Ongoing correction is a 'healthy reset':

Garg added that the ongoing correction in the stocks was a "healthy reset" and not a structural reversal. "Demand, bookings, and pricing power remain intact, but stock prices needed to cool. Once Q4 numbers confirm cash-flow strength and pre-sales momentum, selective names will reclaim leadership," he added.

Ravi Singh, Chief Research Officer at Master Capital Services, meanwhile, said that real estate stocks have weakened despite the uptrend in the broader markets due to rising concerns over sector fundamentals. "Operationally, the pace of construction has dropped significantly, widening the gap between new launches and actual delivery, which directly increases the risk of project delays, weaker cash flows and margin pressure if the scenario continues over quarters," he said.

'Long-term outlook remains intact':

However, the long-term outlook remains intact, according to the analyst. "Supported by urbanisation, infrastructure growth and evolving consumer base, the realty sector continues to be a vital economic pillar," he said.

Yash Chauhan, Research Analyst at INVasset PMS, said that the fall in real estate stocks despite uptrend in broader markets "reflects more caution than capitulation". "The sector entered earnings season with elevated expectations after two strong years of launches, pre-sales and pricing momentum. But with input costs stabilising rather than easing, and mortgage rates still sticky at the upper end of the cycle, investors are reassessing how much of the next leg of growth is already priced in. In several pockets, valuations had expanded meaningfully ahead of fundamentals, so even a mild moderation in booking velocity or collections can trigger profit-taking," he said.

The recent correction also mirrors concerns around stretched affordability in key micro-markets and a slower pick-up in premium housing, which had driven much of the sector's rerating, the analyst added, who also noted that this does not indicate a structural reversal as underlying demand indicators such as urban incomes, job additions and rental yields remain supportive.

'Near-term consolidation looks healthy':

"But with the sector trading at a premium to its long-term averages, it is natural for the market to pause and digest data. Near-term consolidation looks healthy, and stock performance will increasingly depend on delivery, balance-sheet quality and execution rather than sentiment alone," Chauhan said.

Shravan Shetty, Managing Director at Primus Partners, attributed the correction to margin pressure due to declining sales and input cost escalation. He further called the current correction timely after the sharp rise following COVID-19 pandemic.

'Stocks to gain if budget and government reforms help increase economic growth':

"We expect there to be a breakout and stocks to gain if budget and government reforms help increase economic growth and sales pick up. There still remains a risk with the affordable segment not seeing a pickup and household debt rising," he concluded.

Pravesh Gour, Senior Technical Analyst at Swastika Investmart, concluded that real estate stocks have been falling for the past few sessions to a combination of valuation concerns, demand-side worries, and sector-specific pressures. "After a strong multi-year rally, many realty counters had become overstretched and were trading at rich valuations, making them vulnerable to profit-booking. Even minor negative cues can trigger selling when valuations are high," he said.

'Weaker-than-expected quarterly earnings':

"Some major developers have reported weaker-than-expected quarterly earnings, with pressure on profitability and slower pre-sales growth, raising questions about whether current valuations are justified. Additionally, uncertainty around the pace of future rate cuts is weighing on the sector since real estate is highly sensitive to interest rates affecting both homebuyer EMIs and developer borrowing costs," he added.

While near-term volatility persists, structural demand in metros and positive financial discipline among developers indicate a positive outlook into FY26, despite recent corrections and affordability concerns, said Khushi Mistry, Research Analyst at Bonanza. This suggests caution but underlying resilience in the sector, she added.

Nifty Realty: Technical view

The Nifty Realty index is showing clear short-term weakness, with price action slipping below key moving averages and momentum indicators turning decisively bearish, Gour said. The index has broken below the 20-day, 50-day, and 100-day SMAs, and is now testing the 200-day SMA zone, indicating a shift from a previously sideways-to-positive structure into a corrective trend, he said, adding that recent candles show strong red bodies, reflecting persistent selling pressure. Volume has picked up slightly on down-moves.

"Overall, the index has shifted into a short-term downtrend, with the loss of multiple moving averages and weakening momentum indicating vulnerability to further declines. Any recovery attempt is likely to face resistance near the 920–940 zone, where several moving averages converge. Unless the index reclaims these levels with strong buying, the bias remains negative, and the real estate sector may stay under pressure in the coming sessions," the analyst said.

Top losers on Nifty Realty index today:

Anant Raj shares were the top losers on the Nifty Realty index in the afternoon, falling nearly 7 percent to trade at Rs 568.10 apiece. Brigade Enterprises and Prestige Estates shares fell more than 3 percent each, while Oberoi Realty was down over 2.5 percent

Godrej Properties shares fell more than 2 percent, while Phoenix Mills and Macrotech Developers (Lodha) shares well over 1.5 percent each. Sobha and Heavyweight DLF shares were down around 1 percent each.

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