The Indian real estate sector, long considered an attractive investment option, is now facing significant challenges. Recent market trends indicate a decline in the shares of real estate companies.
But why is it that real estate, historically seen as a lucrative investment, is now encountering headwinds? Let us understand.
What’s Happening?
India’s real estate sector, after three years of rapid growth, is now going through a consolidation phase. According to Moneycontrol, Nuvama Institutional Equities believes the sector may face volatility in the near future. Key reasons include weak volume growth, declining housing affordability, and a shortage of mid-income housing.
Investor confidence has weakened because there is no uniformity in the market—an issue not observed between FY21 and FY24. Sales volumes have also recorded a decline between June 2024 and May 2025.
Rising home prices have reduced affordability. As a result, most sales are happening in the premium and luxury segments, limiting the housing cycle. In the coming period, price increases may slow down, which could further reduce demand in the real estate sector.
Decline in Demand and Local Pressures
Demand is falling in two of India’s key real estate hubs: the Mumbai Metropolitan Region (MMR) and Pune. According to a report by NSE-listed real estate data analytics firm PropEquity, housing sales in Q3 2025 may decline 17% to 49,542 units, compared to 59,816 units last year. This drop has also reduced Maharashtra’s sales share from 57% to 49%.
In Q3 2025, the impact on sales within MMR varied. Mumbai saw an 8% drop, Thane recorded a sharp 28% decline, while Navi Mumbai registered only a 6% fall. Pune’s sales fell 16%. On a quarter-on-quarter basis, both MMR and Pune witnessed a 1% decline, indicating that the market slowdown is uneven at the local level.
Widening Supply-Demand Imbalance
In MMR and Pune, new launches dropped 5% to 37,196 units. In Q3 2025, launches fell in Mumbai (40%) and Thane (28%), while Navi Mumbai saw a 12% increase. Pune showed the biggest contrast, where new launches surged 49% despite declining sales. This mismatch could increase unsold inventory and put pressure on prices.
According to Moneycontrol, Nuvama notes that NCR and Pune are currently the strongest markets, with inventory of 10 and 13 months, respectively. In other cities, inventory levels stand at 17–21 months, while Hyderabad is at 26 months.
Real estate stocks are expected to remain range-bound with continued volatility. Bengaluru and Chennai still hold growth potential, Hyderabad may have already peaked, MMR is in the mid-cycle stage, Pune is facing growth fatigue, and Gurugram is grappling with affordability challenges.
What Does This Mean for Investors?
As of September 26, 2025 (Friday), the Nifty Realty Index has fallen more than 6% over the past week, as fears of slowing demand prompted investors to book profits. During this period, 9 out of the 10 stocks in the index remained in the red.
From a long-term perspective, the Nifty Realty Index has delivered a 314% return in the past five years, compared to a 123% rise in the benchmark Nifty. However, so far in 2025, the Realty Index has fallen 17.57%, while the Nifty is up 4.30%. This clearly indicates that after a sharp rally, the realty sector is now under pressure, with investors taking a cautious stance on demand and valuations.
What’s Next?
According to CNBC TV18, real estate research analyst Sumit Kumar from JM Financial believes the first half of the year is traditionally a weak period. This is due to a higher number of inauspicious days and heavy rainfall, which slowed sales momentum. However, the second half of the year is expected to see a pick-up in new launches.
He noted that so far, around 50% of the inventory from new launches has been immediately absorbed, indicating strong demand. He expects that in the upcoming quarters, sales could gain momentum, bringing stability to the sector and renewed confidence for investors.
*The companies mentioned in the article are for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
