Whalesbook
Indian Real Estate Shows Resilience: Nomura Predicts Strong FY26 Sales Amidst Market Headwinds
Nomura's latest preview note paints a promising picture for India's listed real estate developers, anticipating a third consecutive quarter of resilient pre-sales performance in Q3FY26. This underlying strength in housing demand is evident despite the broader pressures faced by equity markets.
The Japan-based brokerage highlights that the appetite for branded residential projects remains robust across various cities and price points. For many leading developers, the primary constraint appears to be supply and the time taken for regulatory approvals, rather than a lack of buyer interest.
Demand Outpacing Supply
Nomura points out that developers are on track for sustained sales momentum, largely driven by continued interest in well-recognized residential offerings. The brokerage believes that the recent dip in developer stock prices reflects the general market sentiment rather than any fundamental weakening in the real estate sector. Sales from both newly launched projects and existing inventory have largely held up compared to the previous quarter, Q2FY26.
However, the pace of new project launches has been varied among developers. Some, like Sobha Limited, introduced multiple projects, while others, such as DLF Limited and Oberoi Realty Limited, did not launch new developments during the quarter. Nomura identifies delays in obtaining regulatory approvals as a potential short-term factor that might cause launches and revenue recognition to shift to subsequent quarters, though it does not diminish underlying demand.
Broad-Based Demand Across Segments
A significant takeaway from the quarter is the widespread nature of housing demand. Nomura's analysis indicates healthy traction for new projects across luxury, premium, and mid-income segments, spanning multiple geographies.
Projects in the super-luxury category, with unit prices ranging from ₹4 crore to ₹17 crore, have received encouraging responses. Developments in the ₹3 crore to ₹3.5 crore range have also attracted buyers, alongside more affordable offerings around ₹1.5 crore per unit. Sales from existing inventory have remained consistent with the prior quarter for most developers, reinforcing the view that end-user demand is strong.
Developer Performance and Outlook
Nomura has a constructive outlook on the real estate sector, reiterating Prestige Estates Projects Limited as its top pick. The firm also favors Macrotech Developers Limited (Lodha) and Aditya Birla Capital Limited (representing ABREL/Birla Estates).
Macrotech Developers is projected to deliver its strongest-ever quarterly pre-sales, estimated at around ₹5,500 crore, marking a 22% year-on-year increase. This figure is slightly below management's guidance, which Nomura attributes to timing issues on specific projects rather than weak demand.
Godrej Properties Limited is expected to post substantial growth, with pre-sales estimated at ₹7,600 crore, a 40% jump year-on-year, supported by multiple launches. Aditya Birla Capital Limited is anticipated to see a significant 225% year-on-year surge in pre-sales to ₹2,200 crore.
Conversely, DLF Limited and Oberoi Realty Limited are likely to report muted numbers due to the absence of major launches and a high base effect from the previous year. Prestige Estates Projects Limited is expected to achieve pre-sales of approximately ₹4,000 crore, up 33% year-on-year, with potential upside contingent on timely project approvals.
Impact
The sustained resilience in housing demand and the projected strong sales performance by leading developers suggest a healthy underlying Indian real estate market. This could translate into increased investor confidence in the sector and potentially positive movement in the stocks of these developers. The positive outlook also contributes to broader economic confidence.
Impact Rating: 7/10
Difficult Terms Explained
- Pre-sales: The total value of property sales booked by developers, typically before the full completion of a project.
- FY26: Refers to the Indian Fiscal Year 2026, which runs from April 1, 2025, to March 31, 2026.
- Brokerage: A financial firm that facilitates the buying and selling of securities (like stocks) on behalf of clients.
- Branded residential projects: Housing developments undertaken by well-known and reputable real estate companies, often associated with higher quality and trust.
- Supply: The availability of housing units or the capacity of developers to construct and deliver them.
- Approvals: Official permissions and clearances required from government bodies for property development and construction.
- Inventory: The stock of unsold properties that developers currently hold.
- Y-o-Y: Stands for Year-on-Year, a comparison of a metric (like sales) against the same period in the previous year.
- Plotted developments: Real estate projects where buyers purchase plots of land, often with the option to construct their own homes.
- Sustenance sales: Ongoing sales from existing projects that are still under construction or nearing completion.
- Pipeline: The schedule or list of upcoming projects that developers plan to launch in the future.
- Disciplined balance sheets: Financial statements that show a company has managed its assets, liabilities, and equity responsibly, often indicating lower debt and strong financial health.