📰The Hidden Weak Spot in India’s Real Estate Cycle | Daily India Briefing

India’s property stocks are sliding not because homes aren’t selling, but because builders are struggling to finish what they started. Today, we explain more.

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Macro

• BPCL is locking in Middle-Eastern crude for 2027 on top of its 2026 orders. Imports of Russian crude are predicted to be around 1.2 million barrels per day going forward with a lot of the remaining being sourced from the Middle-East.  

• Rupee strategists say the RBI can only moderate the rupee's free-fall past 91, not stop it. Kotak Mahindra says the RBI has already spent $45 billion (₹4.1 trillion) to stem depreciation but it cannot invest more in the cause else it risks lowering domestic liquidity. 

• Prices of Russian oil shipped to China have dropped due to weaning demand from India. Shipments are priced at $10 (₹915) below Brent while shipments used to be flatly priced with Brent. Exports from Russia have fallen to their lowest since August.

Equities

• Investors are paying attention to February 1's budget announcement for state-run companies. If the government revives stake sales to raise cash, investors could receive exits on their existing positions. The move would increase cash collection in the face of a revenue shortfall from tax cuts. State-owned firms are flat this year while key indices are down 3.4 percent. 

• IndiGo profits fell by 78 percent last quarter to $60 million (₹5.5 billion) due to its December cancellations. Flight disruptions, regulator charges, and new labor laws caused the hit. Other income rose by 21 percent to $116.9 million (₹10.7 billion). Revenue also missed while costs rose. 

• Zomato parent company, Eternal, sees earnings rise 73 percent. While earnings did rise, they still missed estimates due to increased costs. Shares slipped by 2.7 percent, settling at $3 (₹275.90) and rival company Swiggy also saw shares drop 4.3 percent. 

• Dr. Reddy is going to sell generic Ozempic starting in March, predicting 12 million pen sales in the first year. It is waiting for approval for its generic version of Wegovy, the weight loss drug, and plans to sell in India and Canada starting off.  

Alts

• Serum Institute's (a vaccine company) head wants to bid for Bangalore's cricket team. RCB has been owned by spirits maker Diageo which is looking to exit. RCB is valued at $2 billion (₹183 billion) and will be bid on by Temasek, Blackstone, Serum, PAG, and Carlyle, showcasing the fierce competition to own part of the IPL.  

• Tata is investing $11 billion (₹1 trillion) to build a new 'Innovation City' next to Navi Mumbai airport.The investment will include a data center, semiconductor utilization, and office space. The BJP also announced a $30 billion (₹2.7 trillion) plan to build up Mumbai while Maharashtra already accounts for 10 percent of India’s GDP.

Policy

• Bangladesh quit the t20 World Cup held in India due to tensions. India and Bangladesh have had strained relations due to the ouster of former Bangladeshi PM Hasina who has taken refuge in New Delhi and poor treatment of Hindus in Dhaka.   

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The Hidden Weak Spot in India’s Real Estate Cycle

The past week with Davos has seen markets from Tokyo to New York react poorly. Though India has faced difficulties all of 2026 due to foreign investors selling off, the property market is also seeing some cracks. Oberoi Realty missed estimates on sales and profit while reporting a razor thin operating margin in its residential operations. Those earnings caused investors to sell off both Oberoi and the wider property equity market.  

The BSE Realty Index has also fallen 30 percent since its June 2024 peak compared to a 7 percent gain for the broader Nifty. While there is a delta in performance, this week solidified the risk that all realty gains since 2020 have been from the post-pandemic boom-and-bust cycle that linked the stock market to housing demand. 

When India reopened for business in late 2021, retail investors were flush with cash from stock market gains. That liquid wealth flowed into residential real estate which pushed up home sales starting a new property cycle. Builders saw the rising valuations as a signal to expand aggressively by buying land at elevated prices and operating new projects.

The homebuilder cycle was short-lived with equity returns cooling since then. Not only has the stock market underperformed in the last 2 years, white-collar wage growth has come under pressure from automation fears, global uncertainty, and inflation. The bulk of home sales now are just buyers of houses worth $1 million (₹91.5 million). Even that support is now waning. 

The problem is not a glut of unsold homes. Inventory in the top eight cities is equivalent to about 19 months of sales, the lowest in more than two years. The issue is execution; builders are bringing more projects to market but completing tighter shares of them seen with how builders used to complete 74 percent of new projects in 2017 but now just 57 percent. Part of this is regulation but another piece is slowing demand. Slower construction delays revenue recognition, raises execution risks and squeezes margins, especially when price increases fail to keep up with inflation.

Operational challenges are mounting as well. Construction bans linked to air pollution in Delhi, delays in environmental approvals in Mumbai, and labor shortages are all taking a toll. Skilled workers can often earn more in the gig economy, while welfare schemes and cash transfers may be reducing the incentive for migrant labor to travel long distances for site work. At the same time, as sales slow, some developers may simply be running out of funds.

If completion rates fail to improve, buyer confidence could start to crack, particularly for weaker players reliant on pre-sales to finance construction. That model has already come under severe stress in China seen with the Evergrande scandal a few years ago, where unfinished homes have become a systemic risk. India is nowhere near that scale of trouble, but the market has begun to price in a darker scenario.

See you tomorrow.

Written by Yash Tibrewal. Edited by Shreyas Sinha.

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