5 Reasons Why Real Estate Stocks Are Struggling in 2025 Despite a Booming Sector

After two blockbuster years, real estate stocks have hit a roadblock in 2025. Despite strong revenue and profit growth, sales volume has plunged, project approvals are delayed, and the BSE Realty Index is down 19%. Yet, property prices remain resilient, and financials stay strong. So, what’s really going on? Here’s a deep dive into the key reasons behind this unexpected slump.

1. Market-Wide Slowdown Hits Sales Volume

Real estate stocks have had a rough start in 2025, failing to deliver returns after two strong years. Despite sector-wide revenue and profit growth in the December quarter, a significant decline in sales volume has weighed down the market. Bengaluru and Hyderabad—two key real estate hubs—saw double-digit declines in sales, while project approval delays led to weaker new launches.

2. Realty Index Plunges, Outperforming Past Gains

The BSE Realty Index has dropped 19% so far this year, significantly underperforming the 7% decline in the benchmark Sensex. This sharp drop comes after two stellar years where the realty index soared by 79.5% in 2022 and 33.1% in 2023, far exceeding the Sensex’s returns of 18.7% and 8.2% in the same period.

3. Major Metros Struggle While NCR Shines

The third quarter saw a notable decline in residential real estate sales volume, down 8% YoY to 256.3 million square feet, despite a sequential increase due to festive demand. However, the pain was not uniform:

Hyderabad recorded a 38% YoY drop

Bengaluru saw a 12% decline

Mumbai Metropolitan Region (MMR) dropped 27%

NCR bucked the trend with a 31% YoY growth

Similarly, new launches fell 35% YoY to 184.5 million square feet, with Hyderabad suffering the sharpest decline at 61%.

4. Prices Stay Strong Despite Weak Sales

While sales volume suffered, property prices remained resilient. The all-India average property price surged 15% YoY, with NCR seeing the highest spike at 24%. This pricing strength has helped companies maintain revenue growth despite slower pre-sales activity. 

5. Strong Financials Keep the Sector Afloat

Despite the market correction, the fundamentals remain robust:

Revenue for 10 listed realty firms grew 28.7% YoY in Q3

Net profit surged 65.6%

YoY Collection efficiency improved to 75% (up from 64%)

Major players like Macrotech Developers (Lodha), Godrej Properties, Oberoi Realty, and Sobha posted strong earnings, and DLF continues to expand aggressively with new launches and a vast land bank, prompting Motilal Oswal Financial Services to maintain a BUY rating with a target price of ₹954.

What’s Next?

While analysts expect a revival in new launches in Q4 2025, the challenge lies in matching the exceptionally high sales volume of the previous year. With demand holding steady in select pockets, the real estate sector’s long-term trajectory remains promising despite short-term volatility.