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Real Estate – Commercial to remain bellwether while residential resilient; Plans for affordable housing revival

ICICIdirect Research 23 Jan 2026 DISCLAIMER

Mixed performance from listed players for Q3FY26

Strong updates: Sobha reported pre-sales growth of 52% yoy (up 11% qoq) at ₹ 2115 crore, Lodha’s pre-sales were up 25% yoy (up 23% qoq) at ₹ 5620 crore. Godrej Properties’ pre-sales were up 55% yoy (down 1% qoq) at ₹ 8421 crore, Prestige Estate Projects’ pre-sales were up 39% yoy (down 31% qoq) at ₹ 4184 crore.
Weak updates: Oberoi reported 56% yoy decline (down 36% qoq) in pre-sales at ₹ 836 crore. DLF’s pre-sales were lower 97% yoy (down 90% qoq) at ₹ 419 crore. Weak pre-sales for both companies are attributable to delay in new project launches and lower sales velocity in ongoing projects especially in highest ticket size projects.
Results - Oberoi reported Consolidated revenues (up 6% YoY at ₹ 1493 crore) was led by higher rental income (up 33% YoY at ₹ 301 crore) and flat YoY residential revenue booking (₹ 1107 crore). Consolidated EBITDA margins stayed flat QoQ at 57.4% due to higher margins in rental and hospitality. Consolidated adjusted PAT was up 4% YoY (down 15% QoQ) at ₹ 646 crore. The stock has seen a correction of ~23% over trailing seven months. DLF posted consolidated revenue of ₹ 2020 led by higher revenue booking. Further, gross margins and EBITDA margins were lower 905 bps and 687 bps YoY at 42.7% and 19.3%. Hence, consolidated EBITDA declined 2.5% YoY (up 37.5% QoQ) at ₹ 390 crore.

 
Residential realty market seemed steady in 2025
India’s top eight cities saw 1% yoy decline in sales in 2025 (H2CY2025 stayed flat yoy) to 3.48 lakh units wherein NCR /Pune /Kolkata saw a decline of 9%/ 3%/ 3% yoy while Chennai /Hyderabad /Ahmedabad /Mumbai saw 12%/ 4%/ 2%/ 1% yoy rise and Bengaluru stayed flat. Sales growth across ticket size viz. ₹1-2 cr/ ₹2-5 cr/ ₹ 5-10 cr/ ₹ 10-20 cr/ ₹ 20-50 cr were up 7%/ 20%/ 31%/ 164%/ 55% yoy respectively showing continued aspirational buying behaviour. In 2025, home priced above ₹ 1 crore constituted around half of the sales, growing 14% yoy while sub-₹ 50 lakh recorded 17% yoy dip and comprised 21%. On the pricing front, key residential markets NCR/Hyderabad/Bengaluru/Mumbai/Hyderabad saw price rise of 19%/ 13%/ 12%/ 7% yoy.    
 
Commercial housing remained upbeat in 2025 and expected to be even better in 2026
As per Knight Frank, top eight office markets saw record leasing of 86.4 msf (up 20% yoy) in 2025 with Global Capability Centres (GCCs) accounting for 38% of total office space absorption at 31.8 msf. The outlook for 2026 is expected to be even stronger led by 1) technology sector continuing to drive leasing 2) robust growth for flexible workspace 3) GCCs expected to comprise 35-40% of the total absorption
 
Budget expectations for real estate:
Affordable housing definition in terms of value and unit sizes (currently in metros upto 60 sq mtrs & Rs 45 lakh, non-metros 90 sq mtrs & Rs 45 lakh) to be increased
Increase home loan interest deduction limit (from current Rs 2 lakh to Rs 4-5 lakh)
GST rationalisation on construction contracts (currently 18% to preferably 5%)
Increase credit access for developers (allowing ECB funding which is currently restricted to integrated townships, industrial parks and SEZs)
Incentivise GCCs (introduction of 15% tax rate, reintroduction of tax holiday benefits like for 10 years for new units), promote rental housing (tax exemption for rental income and tax holidays for developers to increase rental supply)

View and stock recommendations – The commercial real estate remained a bright spot during 2025 and is expected to stay strong in 2025.  Residential realty market is expected to remain mixed with larger and organized developers are expected to continue to benefit from consolidation although sharp price rises in markets like NCR, Hyderabad and Bengaluru may slow down velocity. Most of the realty stocks have corrected over trailing one year in the range of ~15-35% while Phoenix Mills was outlier with gains of ~16%. We prefer Oberoi Realty, Phoenix Mills and Brigade enterprises in the large cap space and Mahindra lifespace and Arvind Smartspaces in the mid-cap space.

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