Anant Raj, DLF, Sobha fall up to 3% as realty stocks resume losing streak

Indian real estate stocks came under pressure once again on Wednesday, as investor sentiment turned cautious amid concerns over demand sustainability, rising interest rates, and high valuations. Shares of key players like Anant Raj, DLF, and Sobha Ltd declined by up to 3%, resuming their recent losing streak after a brief recovery earlier this month.

The Nifty Realty index slipped nearly 1.6% in intraday trade, underperforming broader benchmarks like the Nifty 50 and BSE Sensex, which remained flat. Weakness was evident across both residential and commercial real estate counters, highlighting growing nervousness among investors.

Key Stock Movements

• Anant Raj Ltd dropped 3% to ₹248.80, extending its monthly losses to over 9%.

• DLF Ltd, the country’s largest listed developer, fell 2.7% to ₹752.50.

• Sobha Ltd declined 2.9% to ₹1,345.20, weighed down by muted demand commentary.

• Other laggards included Prestige Estates, Godrej Properties, and Brigade Enterprises, which fell between 1% to 2%.

The broader Nifty Realty index has now corrected over 5% in June so far, following a strong performance earlier in the year.

Sector Facing Headwinds

The correction comes amid persistent worries about high home prices, potential delays in project deliveries, and the Reserve Bank of India’s continued stance on maintaining elevated interest rates to contain inflation.

"Realty stocks had run up significantly over the past year, pricing in strong demand, but now there are signs that affordability constraints are catching up with buyers," said Mehul Gandhi, senior equity strategist at Prabhudas Lilladher. "Markets are recalibrating expectations, especially in premium and Tier-1 city markets."

Rising Home Loan Rates Affect Buyer Sentiment

Although demand remained resilient in FY24, there is increasing evidence that higher mortgage rates are weighing on new booking volumes, particularly in the mid-income and affordable segments.

According to property consultancy Anarock, Q1FY25 residential launches grew only 2% year-on-year, and absorption rates have stagnated in cities like Pune and Bengaluru. Projects in Delhi-NCR are also witnessing a lengthening of the sales cycle.

"Interest rates on home loans are hovering near 9%, and buyers are becoming cautious about big-ticket purchases. The slowdown may persist unless we see a cut in lending rates," said Pradeep Mishra, head of research at LKP Securities.

Valuations Under Scrutiny

Analysts also believe that many listed real estate companies are trading at stretched valuations, which are no longer supported by earnings growth projections.

“Real estate stocks, especially large caps like DLF and Godrej Properties, are priced at steep premiums to their NAV. With near-term earnings visibility declining, investors are likely taking some money off the table,” said Tanvi Desai, portfolio manager at Aequitas Investment Advisors.

Institutional Flows Turn Negative

Recent data from NSE indicates that Foreign Institutional Investors (FIIs) have turned net sellers in real estate over the past three sessions. Domestic institutional flows have remained muted as well.

“FIIs are reallocating towards defensives like FMCG and pharma, and sectors sensitive to interest rates are seeing outflows,” said Kunal Savla, an equity dealer at Motilal Oswal.

What Lies Ahead?

Despite short-term pressure, analysts remain structurally positive on Indian real estate over the long run, citing improving income levels, urbanization, and infrastructure upgrades.

However, they advise a stock-specific approach given the growing divergence in execution, debt levels, and geographical exposure.

“Developers with strong balance sheets and low inventory overhang—like Prestige or Mahindra Lifespace—might weather this storm better,” said Sanjay Sharma, analyst at JM Financial.

DLF’s upcoming commercial launches and Sobha’s presence in high-demand cities like Bengaluru remain key factors to watch in the upcoming quarters.

Investor Outlook

While today's correction signals the start of a cautious phase, market participants are closely monitoring macro data, upcoming RBI commentary, and Q1FY25 earnings for further direction.

For now, experts suggest avoiding aggressive buying and watching for consolidation zones in stocks like DLF near ₹730 and Sobha near ₹1,300.

“The realty rally may pause but is not yet over. Investors should use dips to enter quality names gradually,” said Gandhi of Prabhudas Lilladher.