India’s housing upcycle showed clear signs of fatigue in CY25, ending the year on a weak note as both sales value and volumes declined sharply, according to a report by Nuvama Institutional Equities.While headline sales for the full year managed modest growth, worsening affordability and a skew toward luxury housing are emerging as key risks for developers and real estate stocks.Sharp Slowdown in Q4CY25CY25 concluded with a pronounced slowdown in housing demand. Sales value declined 21% YoY in December 2025 and 6% YoY in Q4CY25, marking the sharpest quarterly decline since the current upcycle began in CY21.Importantly, this was the first year-on-year decline in quarterly sales value in four years, underscoring the loss of momentum.Live EventsFor the full year, housing sales value rose just 4% YoY, while launches by value remained flat. In volume terms, the picture was weaker, with sales and launches declining 6% and 8% YoY, respectively, during CY25.Demand Weakens Across Key MarketsNuvama highlights that housing absorption fell year-on-year across all major cities in December, with the NCR witnessing the steepest decline. While Q4CY25 sales value rose sequentially by 4%, year-on-year weakness persisted.City-level trends were mixed during CY25. Bengaluru, Chennai, and the NCR recorded a pickup in volumes, whereas Hyderabad, Mumbai Metropolitan Region (MMR), and Pune reported double-digit declines.Overall, housing absorption volumes were down 6% YoY for the year, reflecting pressure on end-user demand despite stable pricing.Supply Picks Up in Select RegionsOn the supply side, housing launches by value rose 13% YoY in December, but declined 13% YoY in Q4CY25. For CY25 as a whole, launches by value were flat, while volumes declined 8% YoY.Southern cities stood out, with launches increasing 33% YoY in Chennai, 24% in Hyderabad, and 13% in Bengaluru. In contrast, supply declined across most other regions, including a 4% YoY drop in the NCR and a 13% YoY decline in several western markets.Inventory Stable, Prices Continue to RiseDespite weaker volumes, inventory levels remained largely stable. Pan-India inventory stood at 19 months in December 2025, unchanged from the previous month and only slightly higher than 18 months in December 2024.Pune and the NCR remain relatively balanced with 14 months of inventory, while Hyderabad continues to see elevated supply at 28 months.Low inventory levels have supported pricing, with housing prices rising 5–13% YoY across the top seven cities during CY25, further exacerbating affordability challenges for buyers.Realty Stocks: Caution Still WarrantedAlthough real estate stock valuations have corrected since H1CY24, Nuvama remains cautious. Falling housing volumes and deteriorating affordability have raised concerns around net asset value (NAV) growth and earnings sustainability. The brokerage remains neutral on housing stocks, despite recent price corrections.Nuvama believes housing volumes are likely to remain soft unless developers recalibrate their strategy by:Reducing dependence on the luxury segment and refocusing on mid-income and premium housing, andImproving affordability by containing prices and ticket sizes.Outlook: Annuity Players to OutperformLooking ahead, Nuvama expects the current trend of muted volumes to persist. While pre-sales have remained strong, valuation multiples may continue to compress amid concerns over future growth visibility.Within the sector, companies with sizeable annuity or rental portfolios are expected to outperform pure-play residential developers. Prestige Estates remains Nuvama’s top pick in the real estate space, given its diversified business model and stronger earnings visibility.(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)



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