Realty- Developers, Flexible Office Space and Construction by Choice Broking Ltd
Sectoral Overview: Realty – Developers, Flexible Office Space and Construction
Developers: Dip in overall volume is offset by strength in premium housing segment
* In Q2FY26, housing sales in India’s top 7 cities declined 9% YoY to 97,080 units, even as the total sales value rose 14% YoY to INR 1.52 lakh crore — reflecting continued preference for premium and luxury homes. Despite softer volumes, the market remained resilient, with sales outpacing new supply and 1% QoQ growth during a seasonally slow quarter, signaling strong end-user confidence.
* Looking at city-wise sales, the Mumbai Metropolitan Region (MMR) led sales with 30,260 units, followed by Pune (16,620 units) and NCR (13,920 units), though all 3 saw double-digit declines YoY. In contrast, Chennai and Kolkata bucked the trend, reporting 33% and 4% YoY growth, respectively. Together, MMR and Pune contributed nearly half of total housing sales and dominated new project launches, underscoring their continued leadership in India’s residential market.
* The market continued to tilt towards higher-value housing, with luxury units (INR 1.5 crore and above) forming 38% of new supply and premium homes (INR 80 lakh–INR 1.5 crore) contributing another 24%. The mid-segment (INR 40–80 lakh) accounted for 23%, while affordable housing (below INR 40 lakh) made up 16%, underscoring a clear demand shift towards the upper end of the market. Unsold inventory remained steady at around 5.62 lakh units, marginally lower than last year, as sales momentum absorbed most of the new supply.
* Meanwhile, average housing prices rose 9% YoY to INR 9,105 per sq. ft., led by NCR (+24% YoY) and Bengaluru (+10% YoY). The broader market now appears to be entering a phase of price moderation after 3 years of sharp increases, supported by sustained demand and disciplined supply.
* We expect a strong H2FY26E for developers as RBI’s 50 bps rate cut is expected to enhance housing affordability and buyer sentiment, driving real estate demand through the remainder of FY26. The second half, particularly Q4FY26E is also seasonally strong, supported by festive tailwinds and year-end purchase momentum.
India Office and Flexible Work Space Market: Office Market Sustains Momentum on Tech and Domestic Demand
* In Q2FY26, net office space absorption across India’s top 8 cities rose 35% YoY to 16.3 msf, reaching nearly 87% of the full-year absorption of 50.7 msf recorded in CY24.
* During the quarter, technology companies drove the office space takeup with a share of 24%, followed flexible space operators at 21% and engineering and manufacturing (E&M) firms at 15%. Global Capability Centres (GCCs) leased 7.5 msf, accounting for 38% of the overall office leasing in Q2FY26, with tech and E&M companies contributing to over half of the total GCC leasing volume.
* In Q2FY26, domestic firms — led by flexible space operators and technology companies — held over 46% of office space take-up and, in 9M 2025, Indian firms accounted for the largest share in leasing as compared to their American counterparts.
Construction
Execution for companies is expected to remain subdued in Q2FY26 which is generally a seasonally weak quarter due to widespread heavy rainfall. Order execution should pick up in H2FY26E.
Q2FY26E Preview: Realty – Developers, Flexible Office Space and Construction
Developers
Q2FY26E Preview: Companies under our coverage (2) are expected to report pre-sales (INR Mn) growth of (15.5)/19.9% QoQ/YoY. Collections (INR Mn) are expected to grow by 19.2/21.8% QoQ/YoY. What to watch out for: Commentary on pricing trends across the industry and company-specific updates related to progress on business development and approval of key launches. Stance: We maintain a positive stance on the sector but, within that, growth trends could be different for individual companies depending upon their presence in the market segments (Luxury, Premium and Affordable) with BUY on 3/3 stocks, respectively. SOBHA is our top investment idea.
Flexible Office Space
Q2FY26E Preview: Companies under our coverage (2) are expected to report seat addition of 15,000 during the quarter. Revenue growth for Rental/Design & Build (D&B) segments is expected to grow by 34.1/36.1% YoY. Revenue/EBITDA/PAT is anticipated to increase by 41.9/51.9/9.9% YoY..
What to watch out for: Progress on annual seat addition targets and company-specific updates on order inflow for the D&B segment. We have a buy Rating on 2/2 stocks.
Stance: We remain optimistic about the sector, supported by strong tailwinds in India’s managed office and flexible workspace market, propelled by the growth of GCCs, IT services, and the expanding domestic start-up ecosystem. EFCIL is our top investment idea.
Construction
Q2FY26E Preview: Coverage companies (1). PSP Projects is expected to report Revenue/EBITDA growth of 23.6/7.8% YoY. EBITDA margin is expected to come in at 5.6% (-82 bps YoY).
What to watch out for: Guidance on EBITDA margin and any possible update on business mix from the Adani-Group vs non Adani group companies.
Stance: We have a ‘Reduce’ stance on PSPPL.
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