Why are real estate stocks underperforming despite strong pre-sales? 2 top picks
Nuvama Institutional Equities highlights divergences in India's housing cycle and attributes real estate stock underperformance to faltering growth confidence.
- Sep 18, 2025,
- Updated Sep 18, 2025 4:22 PM IST
Real estate stocks are underperforming the market despite healthy pre-sales growth, raising questions about the current stage of the housing cycle. In its latest review, Nuvama said that the homogeneity of FY21–24 is over. While Bengaluru and Chennai housing markets can still expand, Hyderabad appears to have peaked. The Mumbai Metropolitan Region (MMR) is at a mid-cycle stage, Pune shows signs of “growth fatigue,” and Gurugram struggles with affordability, Nuvama said.
According to the brokerage, breadth of the housing cycle, product mix, and interest rate cuts—not just pre-sales growth—will drive stock performance going forward. Nuvama cautioned that real estate stocks could remain range-bound if cyclicals continue to be out of favour.
This caution comes despite strong pre-sales, with listed developers reporting 19 per cent and 39 per cent year-on-year growth in FY25 and Q1FY26, respectively. Yet, the Nifty Realty Index fell around 5 per cent in FY25 and is down about 13 per cent year-to-date in CY25. Nuvama attributed this divergence to faltering confidence, as demand is no longer broad-based across cities.
Sales volumes declined for 12 straight months between June 2024 and May 2025, with growth visible only in Chennai and the National Capital Region during FY25. The skew towards premium and luxury housing has narrowed the cycle and worsened affordability. In Hyderabad, sales volumes dropped 32 per cent year-on-year in FY25 as price momentum cooled.
Nuvama noted that demand in Bengaluru, supported by strong job creation, and in Chennai, backed by relative affordability, still has scope to grow. Hyderabad, after an upcycle that began in FY17, may already be past its peak. Pune faces a high-base effect, while Gurugram’s affordability challenge is stark: in H1CY25, only 12 per cent of new launches were priced below Rs 30 million, while 51 per cent were above Rs 50 million. In the Rs 50–100 million range, Gurugram sold as many units in FY25 as MMR, Bengaluru, Pune, Hyderabad, Chennai, and Kolkata combined.
On the outlook, Nuvama flagged two concerns: weak volume growth due to stretched affordability and a shortage of mid-income housing, and job creation risks amid tariff wars and uneven economic growth. It believes volatility will persist, with falling mortgage rates offering downside support but valuations and weak volumes capping the upside.
In terms of stock preferences, Prestige Estates and Brigade remain Nuvama’s top picks, both rated ‘BUY’.
Real estate stocks are underperforming the market despite healthy pre-sales growth, raising questions about the current stage of the housing cycle. In its latest review, Nuvama said that the homogeneity of FY21–24 is over. While Bengaluru and Chennai housing markets can still expand, Hyderabad appears to have peaked. The Mumbai Metropolitan Region (MMR) is at a mid-cycle stage, Pune shows signs of “growth fatigue,” and Gurugram struggles with affordability, Nuvama said.
According to the brokerage, breadth of the housing cycle, product mix, and interest rate cuts—not just pre-sales growth—will drive stock performance going forward. Nuvama cautioned that real estate stocks could remain range-bound if cyclicals continue to be out of favour.
This caution comes despite strong pre-sales, with listed developers reporting 19 per cent and 39 per cent year-on-year growth in FY25 and Q1FY26, respectively. Yet, the Nifty Realty Index fell around 5 per cent in FY25 and is down about 13 per cent year-to-date in CY25. Nuvama attributed this divergence to faltering confidence, as demand is no longer broad-based across cities.
Sales volumes declined for 12 straight months between June 2024 and May 2025, with growth visible only in Chennai and the National Capital Region during FY25. The skew towards premium and luxury housing has narrowed the cycle and worsened affordability. In Hyderabad, sales volumes dropped 32 per cent year-on-year in FY25 as price momentum cooled.
Nuvama noted that demand in Bengaluru, supported by strong job creation, and in Chennai, backed by relative affordability, still has scope to grow. Hyderabad, after an upcycle that began in FY17, may already be past its peak. Pune faces a high-base effect, while Gurugram’s affordability challenge is stark: in H1CY25, only 12 per cent of new launches were priced below Rs 30 million, while 51 per cent were above Rs 50 million. In the Rs 50–100 million range, Gurugram sold as many units in FY25 as MMR, Bengaluru, Pune, Hyderabad, Chennai, and Kolkata combined.
On the outlook, Nuvama flagged two concerns: weak volume growth due to stretched affordability and a shortage of mid-income housing, and job creation risks amid tariff wars and uneven economic growth. It believes volatility will persist, with falling mortgage rates offering downside support but valuations and weak volumes capping the upside.
In terms of stock preferences, Prestige Estates and Brigade remain Nuvama’s top picks, both rated ‘BUY’.