Realty bites: Real estate stocks sink early in 2026 as sales slow, affordability concerns weigh

Nifty Realty sinks 11% so far in 2026.

• Real estate stocks dropped 11% in 2025 due to weak sales and rising inventory.
• Housing sales fell 14% YoY in 2025, launches dropped 19% YoY.
• Premium segment drove sales, while affordable and mid-income segments struggled

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Around 20 days into the new year, the real estate sector has emerged as the biggest loser so far, tumbling over 11 percent. All the Nifty Realty constituents have seen a significant tumble as well, sinking between 7-20 percent, as moderating pre-sales, fewer launches, rising inventory levels, coupled with an affordability crisis hits the realty segment.

So what is driving the downturn in real estate stocks?

Housing sales have been on a consistent downward trajectory over the past four quarters, with the number of units being sold falling 14 percent YoY in 2025. This was the second consecutive year of decline in the number of units sold with CY24 sales having fallen 5 percent YoY.

The quarter ended December saw the lowest sales in around 16 quarters, at roughly 98,000 units, lower by 28 percent compared to the peak sales of 1,35,000 units recorded in the March quarter of 2024. Further, with updates that some companies are unable to meet their pre-sales guidance, there has been a sharp correction in real estate stocks.

Additionally, even launches have tempered. In CY25, launches aggregated 4,00,000 units, down 19 percent YoY, following a two percent YoY supply in CY24. Except Hyderabad and Chennai, launches decreased YoY in all other cities in CY25. Further, Mumbai continues to account for more than a third of unsold inventory in the country.

"We expect pre-sales across our residential real estate coverage to remain modest, largely reflecting subdued launches. Additionally, broader market weakness amid geopolitical uncertainties has further weighed on stock performance," noted Pankaj Kumar, VP-Fundamental Research, Kotak Securities.

Segment-wise breakdown

As in CY24, the bulk of sales during CY25 was driven by premium/luxury segments, while affordable and mid-income segments continued to face challenges. "In that sense, the width of the housing rally was relatively narrow unlike the previous upcycle when demand was robust across segments," noted Nuvama Institutional Equities.

As a result of the thrust towards premiumization, volumes have taken a hit. The brokerage quipped, "The premiumisation trend has meant that over the past 18 months, the trend of improving volumes has been upended. It is no surprise that real estate stocks have also reported a decrease post-June 2024 when the divergence started."

Region-wise trends

However, overall, while volumes may look muted - there is a sharp divergence across the top 7 cities. The Mumbai Metropolitan Region's luxury housing market continues to do well, despite rising supply, noted Karan Khanna of Ambit Capital, while Bengaluru is facing delays in launches on account of late RERA approvals.

By number of units sold, the MMR (34 percent), Pune (18 percent) and Bengaluru (16 percent) were major contributors to sales in CY25. YoY, Bengaluru gained some share, whereas MMR and Pune lost share. Demand rose 4 percent YoY in Bengaluru and 5 percent YoY in Chennai, but slipped 19-22 percent compared to 2024 in Mumbai, Pune and Hyderabad.

Analysts at Nuvama pointed to the lower levels of inventory in the NCR region. "In our view, very low unsold inventory levels such as those in the NCR across segments (despite surging prices and volume growth) point towards a ‘bubble’ in the system. One needs to have a cautious view about such markets."

Outlook for real estate stocks

Nuvama argued that housing volumes would remain soft until developers reduce focus on the luxury segment and reorient towards the mid-income/premium segment. Further, they should focus on improving affordability by keeping prices, along with the ticket size contained, which will spur demand.

Following the recent correction, valuations across most residential real estate stocks appear reasonable. "While industry volumes have shown some moderation, we continue to be constructive on listed developers, underpinned by ongoing geographical expansion and continued market share gains. We prefer DLF, Prestige and Lodha for the long term," said Kotak Securities.

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