Real Estate Q1 FY26: Record Presales, Strong Market Outlook

Q1 FY26 Indian real estate outlook: record presales, robust cash flows, premium demand across NCR & Bengaluru; approvals and execution remain key risks.

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1. Q1-FY26 Short Take

• Record presales at DLF, Prestige, Sobha, Signature Global.

• Lodha, Godrej steady; supply timing remains the constraint.

• Balance sheets strong; debt costs trending lower.

• Offices stable, malls resilient, hotels rebounding.

• Outlook: Bullish cycle intact, but execution and approvals are the swing factors.

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2. Demand Trends — Market Themes

Residential sales velocity remained vigorous, with multiple developers achieving all-time high bookings in Q1 FY26. Broadly, pricing power and premiumization were evident

• Premiumization is evident as developers like Signature, Brigade, Oberoi, and Phoenix achieved higher realizations, supported by strong demand for upscale projects.

• The NCR market surged, with Prestige, Sobha, and others reporting exceptional sales in Gurgaon and Noida, making the region a key growth driver this quarter.

• Bengaluru remained a stronghold, contributing significantly to sales for Godrej, Prestige, and Lodha, reinforcing the city’s position as a steady demand center.

• Mid-income housing is reviving, with Lodha highlighting renewed strength in this segment even as luxury sales remain robust.

• Launch absorption stayed high, with most projects selling 70–90% of their inventory within weeks of launch, underscoring depth of demand.

• Sales run-rates are holding steady, as shown by Lodha maintaining ~₹275 Cr in weekly sales even during the seasonally weak July period.

• The industry consensus is clear: demand remains strong across cities, while supply and regulatory approvals are the only real constraints.

Overall, all top developers affirm that demand far outstrips supply in their markets – as Lodha’s CEO stated, sales for the leading players are “constrained by supply and not by demand,” implying that the onus is on developers to feed a hungry market.

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3. Supply & Launches

Developers are scaling supply with large launch pipelines and fresh land deals, while staying cautious on approvals and execution.

Execution & Discipline

• Approvals remain the key swing factor: Lodha (EC), Sobha (OC), Prestige (Bangalore nods).

• Construction capacity being upgraded: Signature Global has onboarded top-tier contractors (Ahluwalia, Capacite) to accelerate township build-outs.

• Most developers report steady or early completions, highlighting execution confidence.

Takeaway:

• Supply engines are accelerating, but carefully phased.

• Approvals and OCs remain the main bottleneck.

• Developers are matching demand without overbuilding, unlike past cycles.

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4. Financial Health – Q1 FY26

Leverage & Liquidity

• Liquidity ample, leverage contained, financial discipline rewarded with ratings upgrades.

Cost of Debt

• Falling across the board:

• Developers expect further easing as RBI cuts transmit.

Profitability & Margins

• Sobha: EBITDA margin depressed (~8%) due to OC delays; pro forma PBT ~₹400 Cr if OCs recognized.

• DLF: Reported GM 28%, but embedded gross profit on Q1 sales ~₹4,500 Cr (~40%+ project margins).

• Lodha: Embedded EBITDA margin 33%; PAT margin ~21%; ROE ~20%.

• Accounting margins muted by timing, but embedded margins strong and will flow through as completions occur.

Takeaway

• Strong Collections & Cash Flows

• Developers are cash generative, low-levered, and funding growth without balance sheet stress.

• Falling cost of debt and rating upgrades improve financial flexibility.

• Embedded margins assure strong earnings recognition ahead.

• Sector financial health is materially stronger than in past cycles.

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5. Annuity Engines – Q1 FY26

Annuity businesses are adding meaningful, steady cash flows and supporting valuations.

• Office and retail rental income is growing in the high single digits (with potential for faster growth as new assets lease up and repositioning yields benefits) – reflects confidence in future rental upsides.

• High occupancy across completed offices and malls signals that the top developers’ annuity assets are near optimal utilization, so incremental NOI growth will come from new developments and rent escalations – both of which are in play now.

• Many firms are in the midst of significant expansion of rental portfolios. Moreover, balance sheets can comfortably support these expansions: rental yields and refinance rates are such that companies like Phoenix and DLF can fund projects or acquisitions (like Phoenix’s CPPIB deal) without straining debt metrics.

• These annuity engines not only diversify revenue but also bolster developers’ resilience and valuations (with several exploring REITs/IPOs to surface this value).

Takeaway

• Offices near full occupancy at top players; strong leasing in new assets (DLF, Prestige, Brigade).

• Malls resilient; Phoenix using churn to upgrade tenants and drive future rent growth.

• Hotels rebounding strongly; new IPOs and REIT plans highlight monetization focus.

• Annuity portfolios provide steady cash flows, de-risk earnings, and support valuations.

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6. Management Tone & Risks – Q1 FY26

Cycle View

Management commentary across the industry struck an optimistic chord, positioning the cycle as being firmly in an uptrend with more room to run. Lodha’s CEO described the sector as “in the early stages of a long up cycle”, underpinned by favorable macros, urbanization, and improved affordability.

Developers also emphasized that sales are limited by supply, not buyer interest – a refrain repeated by multiple CEOs. Indeed, a common theme was that whenever fresh quality inventory is launched, it sees near-instant absorption (with Oberoi quipping that in the interim between launches, sales naturally “plateau” until the next spike – “don’t read much into that”).

• Lodha: Sector is in the early stages of a long upcycle.

• Godrej: Euphoria is over; market now in a steady growth phase.

• Prestige: Sustained momentum; confident of beating guidance.

• DLF: Strong embedded margins/cash ensure resilience.

Approvals & Regulatory

• Lodha: Environmental clearance delays since Aug-24; Supreme Court resolution awaited.

• Sobha: OC delays deferred ~₹650 Cr revenue.

• Prestige: Key Bangalore launch dependent on approvals.

• Theme: Approvals remain the main gating factor for launches and revenue recognition.

Execution

• DLF: Weather-related delays impacted collections timing.

• Godrej: Upgrading contractors and digitizing labor management to lift execution run-rates.

• Signature Global: Brought in Grade-A contractors to accelerate township build-outs.

Pricing Discipline

• Lodha: Targets ~6% annual price increase, in line with affordability.

• Godrej: Holds premium stock to capture higher realizations.

• Oberoi: Ecosystem-driven pricing (integrated mall, metro, lifestyle assets).

Financing & Leverage

• Cost of debt easing across the board:

• Balance sheets strong; multiple credit upgrades (Brigade, Signature).

Consensus Risk View

• Demand remains strong and broad-based.

• Key risks are execution delays and approval bottlenecks, not demand or financing.

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7. Cycle Outlook & Watchpoints

• The housing upcycle is intact: demand is strong, supply is lagging.

• Branded players are gaining share with record presales, strong collections, and healthier balance sheets.

• Approvals and execution are the real swing factors, not demand or financing.

• Stance: Bullish. Into Q2–Q3, watch three things — (1) approval timelines, (2) on-time execution of large pipelines, and (3) leasing ramp-up in offices/malls that can add steady cash flow torque.

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Sources: Company Q1 FY26 Earnings Call Transcripts (DLF, Macrotech Developers/Lodha, Godrej Properties, Prestige Estates, Oberoi Realty, Phoenix Mills, Brigade Enterprises, Signature Global, Sobha Ltd.) etc.

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