India's real estate sector is facing mounting pressure as major stocks experience significant declines amid growing concerns about the sustainability of the ongoing housing upcycle. The sector's challenges have become particularly evident in early 2026 trading sessions, with investors showing increased caution toward real estate investments.

Stock Performance and Market Impact

The real estate sector has witnessed substantial selling pressure, with key players experiencing notable declines. The performance data reveals the extent of market concerns:

The Nifty Realty index has significantly underperformed compared to broader market indices, with nine out of ten constituents now trading with losses. The index underperformed the Nifty 50 by 26 percentage points and the Nifty Midcap index by 22 percentage points in 2025.

Company-Specific Developments

Signatureglobal's quarterly business update has particularly concerned investors, as the company announced it would not meet its pre-sales guidance of ₹12,700 crore. The company attributed this shortfall to the overall market environment turning "softer," which has directly impacted their performance. This guidance, which appeared comfortable just months ago, now seems unattainable given current market conditions.

Mixed Quarterly Results Across Sector

Despite the overall negative sentiment, quarterly results have shown mixed performance across different companies:

Market Analysis and Expert Views

According to Knight Frank's report, the NCR Housing Market experienced measured moderation in 2025, with the earlier post-pandemic surge primarily driven by pent-up demand. The report indicates that "the market now appears to be transitioning into a more stable phase, with demand-supply dynamics normalizing."

Equirus noted on December 31 that some impact has been observed in residential real estate demand in certain market pockets. Jefferies has expressed concerns about flat volumes potentially indicating a residential cycle reversal from the upturn that has continued for over five years. However, the brokerage maintains optimism about the upcycle's sustainability, projecting volume growth revival to 5% to 10% in 2026, led by the mid-segment. Combined with expected pricing gains of 6% to 8%, Jefferies anticipates industry value growth of 10% to 15%.

Current Market Position

Real estate stocks are currently trading below historical averages, reflecting the market's cautious stance toward the sector. The sustained underperformance compared to broader market indices suggests that investor confidence in the real estate sector's near-term prospects has diminished significantly, with market participants closely monitoring demand-supply dynamics and pricing trends for signs of stabilization.

India's Real Estate Sector continues to demonstrate exceptional momentum in capital markets, with significant fundraising activity and improved affordability metrics positioning the industry for sustained growth.

Strong Capital Market Performance in FY26

The real estate sector raised ₹17,867 crore through 11 capital market deals during April-December FY26, according to Equirus Capital. This performance has already matched the total number of deals completed in FY25, with both deal count and fundraising amounts likely to surpass previous highs.

The deals highlight sustained investor appetite across various funding instruments, demonstrating the sector's growing maturity and institutional acceptance.

Historical Fundraising Patterns Since FY18

Since FY18, the real estate industry has collectively raised ₹72,331 crore across different market segments. REITs have emerged as the largest beneficiaries of this capital influx, reflecting the growing institutionalization of real estate investments.

Housing Affordability Reaches Three-Decade Best

Housing affordability in India has reached its most favorable level in nearly 30 years, driven by multiple supportive factors. The property price-to-annual income ratio has declined dramatically from 22.00 in 1995 to 3.30 in 2024, reflecting substantial improvement in affordability across urban India.

Key supporting factors include:

• Steady home loan rates since FY21
• Stable rental yields
• Rising income levels across urban markets
• Expected narrowing of gap between home loan rates and rental yields to below 500 basis points in FY26

Market Dynamics and Demand Patterns

Real estate has emerged as the most preferred asset class in H1 2025, supported by changing lifestyles, rising aspirations, income growth, and favorable financing conditions. Residential real estate across India has maintained healthy absorption levels that match or exceed new supply over recent years.

The top seven cities witnessed robust sales momentum during calendar year 2024, supported by a steady pipeline of new launches. This balance between supply and absorption is sustaining pricing power and developer confidence across key markets, indicating controlled inventory levels and healthy demand fundamentals.

Sector Outlook and Growth Trajectory

Equirus Capital maintains a constructive outlook for the sector, citing strong fundamentals supported by improved affordability, institutional capital inflows, and sustained end-user demand. The sector's upcycle is expected to continue in the near term, backed by strong economic growth and consumption trends. With REITs, listed developers, and capital markets playing an increasingly important role in sectoral funding, the Indian real estate sector appears well-positioned to sustain its growth trajectory in the coming years.