NIFTY REALTY index declines 16% in 2025; what does 2026 have in store for realty sector?

In comparison, the benchmark NIFTY50 index has jumped 9% during the window, data show.

The major reason behind the fall in real estate stocks, as noted by analysts, is valuation concerns.

"Many developers saw their stock prices double within 12–18 months, and the market is now reluctant to pay premium multiples without new triggers. Investors are shifting profits to sectors with clearer earnings visibility," he explained.

Indian real estate sector: How was 2025?

Industry experts opine that India’s real estate sector continued to be on the upswing throughout 2025, supported by strong economic growth, heightened consumption levels, progressive government policies, and sustained investor confidence.

Although global trade friction disrupted supply chains, the year also witnessed a gradual easing of inflationary pressures, improvements in credit accessibility, traction in equity markets and a considerable reduction in benchmark lending rates, all of which boosted consumer sentiments and enhanced consumption across economic sectors, including real estate.

A recent report by Colliers India notes that office space demand in 2025 remained upbeat as companies across Technology, Banking, Financial Services, and Insurance (BFSI); the engineering & manufacturing domain; and flex space operators continued to drive leasing activity across key markets, aided by evolving workplace strategies and a rising focus on high-quality, amenity-rich commercial developments.

Housing sales also remain firm despite increasing cost pressures, supported by a rise in average income levels, improving affordability, enhanced connectivity, and traction amongst homebuyers seeking lifestyle upgrades in gated communities.

The industrial & warehousing segment, too, remained upbeat in 2025, supported by logistics upgrades, modernisation of local supply chains, and sustained Grade A space demand from Third-Party Logistics (3PL) players and firms from segments such as engineering, e-commerce, automobiles, etc.

At the same time, mixed-use and alternative asset classes such as data centres, senior living, and co-living have witnessed rising participation from institutional investors, driven by robust demand, rapid digital adoption, demographic shifts, and evolving lifestyle needs.

"Overall, 2025 has been a year of sustained institutional investor participation, higher consumer confidence, and broader diversification led by expanding opportunities across Tier II/III cities of the country, setting the foundation for more balanced real estate growth in the coming years," the report added.

Outlook for 2026

The real estate sector is set to continue its steadfast growth journey marked by institutionalisation and diversification, supported by heightened consumption, steady occupier interest and an uptick in investor confidence.

Demand across both commercial and residential segments is expected to remain healthy, driven by evolving workplace models, rising homeownership, steady improvements in affordability and infrastructure-led connectivity enhancements.

Badal Yagnik, Chief Executive Officer & Managing Director, Colliers India, said, "Indian real estate is entering 2026 with stronger growth prospects and greater depth across asset classes. Industrial & warehousing demand will accelerate further as domestic manufacturing scales up and supply chains modernise."

At the same time, alternative asset classes, including data centres, co-living and senior living, will attract greater institutional interest amid demographic and digital shifts.

Additionally, with the expansion of REITs, SM-REITs & InvITs and a growing focus on quality, sustainability & technology-led development, 2026 is set to reinforce India’s position as a future-ready and globally competitive real estate market, Yagnik added.

Real estate stocks

Analysts view the recent correction in Indian real estate stocks as a “healthy reset” driven largely by stretched valuations, with the sector well placed for a renewed rally.

They believe the long-term fundamentals remain intact, supported by robust demand and favourable government policies that continue to provide underlying strength.

However, certain risks should also be considered, including concerns around the affordable housing segment, which has not witnessed the same demand recovery as premium properties. Additionally, global economic uncertainties and fluctuations in interest rates could weigh on the sector.

A lag between construction progress and new project launches in some regions may also pose risks if not managed effectively.