Prestige Estates: Nuvama's Top Pick as Housing Market Cools

A Tale of Two Markets

The Indian residential real estate sector presents a complex picture. While the broader housing upcycle showed signs of fatigue through CY25 with declining sales volumes, top-listed developers reported a remarkably strong performance in the second quarter of FY26. According to analysis from Nuvama Institutional Equities, this divergence highlights a market grappling with affordability challenges even as established players leverage brand equity and financial discipline to secure robust growth. This dynamic has led the brokerage to adopt a cautious stance on the sector overall, while identifying specific companies with resilient business models as top investment picks.

Broader Market Shows Signs of Fatigue

Data from CY25 indicated a clear slowdown in India's housing momentum. Both sales value and volumes experienced a sharp decline, signaling an end to the homogenous growth seen from FY21 to FY24. A key factor driving this trend is worsening affordability, exacerbated by a significant rise in property prices. Across the top seven cities, housing prices increased by 5–13% year-on-year during CY25. This price appreciation, coupled with a market skewed towards luxury and premium properties, has pushed many potential homebuyers to the sidelines. Nuvama noted that sales volumes fell for 12 consecutive months between June 2024 and May 2025, underscoring the narrowing width of the housing cycle.

Listed Developers Defy the Slowdown

In stark contrast to the broader market, India's leading listed real estate developers demonstrated exceptional resilience in Q2FY26. Pre-sales for the top 23 players surged 31% year-on-year to ₹4,05,000 crore. This growth is particularly noteworthy as it occurred despite a 61% year-on-year drop in new project launches among the top 15 developers. Companies successfully capitalized on strong sustenance demand for their ongoing projects. Collections, a vital indicator of financial health, grew 15% YoY to ₹26,644.4 crore, supported by accelerated construction and steady customer payments. This performance suggests that while the overall market is cooling, buyers continue to gravitate towards trusted, well-capitalized developers.

Prestige Estates: A Standout Performer

Among the listed players, Prestige Estates has emerged as a clear outperformer and Nuvama's top pick. The company reported its highest-ever quarterly pre-sales in Q1FY26, with a staggering 300% year-on-year surge to ₹12,130 crore. This was largely driven by the successful launch of 'The Prestige City' in Indirapuram, its debut project in the National Capital Region (NCR), which contributed nearly 59% of bookings. The momentum continued into Q2FY26, with pre-sales growing 50% YoY to ₹6,017.3 crore. This strong performance has led Nomura to project the company's full-year presales could reach ₹29,000 crore, surpassing its own guidance of ₹25,000-27,000 crore. Nuvama raised its target price for Prestige to ₹2,009, citing its improving launch trajectory and successful geographical diversification.

Nuvama's Cautious Sector Outlook

Despite the strong numbers from top developers, Nuvama remains cautious about the sector's near-term prospects. The brokerage warns that the homogeneity of the FY21-FY24 growth period is over. Concerns persist around the sustainability of net asset value (NAV) growth and earnings if affordability does not improve. Nuvama believes real estate stocks may remain range-bound, with falling mortgage rates providing downside protection while valuation concerns cap the upside. The brokerage suggests that for the market to regain broad-based momentum, developers must refocus on the mid-income segment and contain price increases to improve affordability.

Regional Divergence in Housing Markets

The national trend of moderation masks significant regional variations. According to Nuvama's analysis, different micro-markets are at different stages of the property cycle. Bengaluru and Chennai are expected to continue growing. In contrast, Hyderabad appears to be past its peak, with sales volumes already moderating. The Mumbai Metropolitan Region (MMR) is considered to be in a mid-cycle stage, while Pune is exhibiting signs of 'growth fatigue'. The Gurugram market, a key part of the NCR, faces a significant 'affordability challenge' that could slow future sales.

Financial Discipline and Future Strategy

A positive takeaway from the recent performance of listed developers is their sustained financial discipline. Net debt-to-equity ratios for many players, including Sobha, Oberoi, and DLF, are at multi-year lows. This strong financial footing allows them to pursue strategic land acquisition, with developers allocating around 34% of H1FY26 collections towards land capex. This indicates confidence in long-term housing demand. Looking ahead, developers are guiding for 18–20% YoY pre-sales growth in FY26, backed by a robust launch pipeline planned for the second half of the year.

Conclusion: A Market for Selective Bets

The Indian real estate sector is navigating a period of transition. The broad-based, post-pandemic upcycle is giving way to a more fragmented market where affordability and regional dynamics play a crucial role. While overall market volumes may remain soft, financially strong developers with diversified portfolios and strong brand recognition are poised to continue capturing market share. Nuvama's analysis suggests that companies with significant annuity or rental income, like Prestige Estates and Brigade Enterprises, are better positioned to outperform. Investors will likely need to be selective, focusing on companies with proven execution capabilities and a strategy aligned with the evolving market conditions.