India’s residential real estate sector posted a modest recovery in the third quarter of FY25, with sales increasing by 10% on a sequential basis. That said, sales remain down by 8% on a year-on-year (YoY) basis, primarily owing to weak launches, which saw a significant drop of 35% YoY and 20% quarter-on-quarter (QoQ).

The salient trend is that listed developers experienced a notable rebound in pre-sales, with a 16% YoY growth in Q3FY25, largely driven by strong performances from key players such as DLF, Lodha, Signature Global, Brigade, Oberoi Realty, and Sunteck, according to a research report by Kotak Institutional Securities.

DLF led the charge with record pre-sales of ₹121 billion in Q3 FY25, marking an impressive 34% YoY increase. The developer exceeded its full-year sales guidance, showcasing a robust market demand and effective project execution. Similarly, Signature Global reported a remarkable 120% YoY growth in pre-sales, reaching ₹27.7 billion for the quarter, marking its fourth consecutive quarter of strong performance.

Oberoi Realty also posted impressive results with pre-sales of ₹19.2 billion, up 144% YoY, driven largely by the success of its Pokhran Road project. Godrej Properties reported pre-sales of ₹54.5 billion in Q3FY25, with ₹33.8 billion attributed to new launches, reflecting strong market confidence.

Lodha continued its growth trajectory, reporting ₹45.1 billion in pre-sales, up 32% YoY. Sunteck also showed positive momentum with ₹6.3 billion in pre-sales, marking a 40% YoY increase.

In contrast, Prestige faced a challenging quarter, with pre-sales falling by 43% YoY to ₹30 billion, highlighting the uneven performance across the sector. Brigade, however, delivered very strong results, reporting ₹24.9 billion in pre-sales, up 63% YoY.

“Valuations for most residential real estate stocks stand at 6-10X adj. EV/EBITDA (FY2026E) after the recent stock market weakness. Developers continue to guide for double-digit sales growth, aided by industry growth and market share gains. 3QFY25 saw some sequential improvement in sales. Developers continue to point out delays in the approval process. We expect a further pick-up in 4QFY25 sales, aided by improved launches,” the report noted.

Positive market sentiment fuels buying in real estate stocks

In addition to the improved performance of developers, the broader real estate sector has benefited from positive market sentiment. The Nifty Realty index settled more than 1.5% higher on Wednesday (February 19), marking its third consecutive day of gains after a volatile period. Nine out of the 10 constituents of the sectoral gauge ended in the green, following a sharp correction over the past six months. However, the sectoral gauge, the Nifty index, has corrected nearly 19% so far this year.

The rally this week in real estate stocks has come amid two major positives for the sector. First, Finance Minister Nirmala Sitharaman’s pro-middle class Budget 2025, wherein the government announced the exemption of tax on income up to ₹12 lakh from the financial year 2025-26 onwards. This move is seen as a significant boost to consumer spending, particularly in the real estate sector.

Second, the Reserve Bank of India’s (RBI) recent 25-basis point reduction in the repo rate during the February monetary policy has further lifted sentiment, making borrowing more affordable and encouraging investments in real estate.

Despite these supportive factors, the key question remains whether this rally can be sustained and how long the road to recovery is.