Revisiting the Realty Sector: Steady Fundamentals with Moderating Valuations

Key Highlights:

• While the Nifty Realty Index has undergone a time and price correction since mid-CY2024, fundamentals have stayed resilient over this period.
• Residential sales and premium housing demand have remained strong, while office vacancies across major cities have fallen to multi-year lows.
• The Nifty Realty Index’s P/B ratio has declined to slightly below its 5-year average, potentially offering a more favourable entry point for longterm investors.

India’s real estate sector is on a strong
long-term trajectory, supported by rising urbanization, growing disposable incomes and policy reforms. Demand for urban housing continues to rise, driven by an expanding middle-income population and increasing demand for premium offerings. Earlier reforms implemented by the Government including the Real Estate Regulation and Development Act (RERA) and the Goods and Services Tax (GST) reforms have significantly improved transparency, thereby strengthening investor confidence.

India’s real estate sector is on a strong
long-term trajectory, supported by rising urbanization, growing disposable incomes and policy reforms. Demand for urban housing continues to rise, driven by an expanding middle-income population and increasing demand for premium offerings. Earlier reforms implemented by the Government including the Real Estate Regulation and Development Act (RERA) and the Goods and Services Tax (GST) reforms have significantly improved transparency, thereby strengthening investor confidence.

Fundamentals steady across residential and commercial segments

Source: Nuvama Institutional Equities. As on Jun 30, 2026

Residential Market:

While the Nifty Realty Index has undergone a price correction since mid-2024, underlying fundamentals have remained resilient in the residential segment. The growth rate of housing sales (YoY% change in value, trailing 3-month basis) has stayed broadly positive over the last 2 years. There was a brief period of negative growth towards the end of CY2025, but sales recovered in H1 2026. This demonstrates resilience of the real estate market, as the recovery and stabilization have occurred despite the West Asia conflict. Furthermore, the volume growth for homes with ticket size > Rs. 1.5 cr. has remained positive since mid-CY 2024. This suggests the premiumization trend in the real estate segment is continuing at a healthy pace, potentially creating a multi-year tailwind for companies which cater to the affluent segment. Several of these companies are constituents of the Nifty Realty Index.

Source: Nuvama Institutional Equities. As on Jun 30, 2026

Commercial Real Estate Market:

The commercial real estate market has remained strong, with office leasing vacancies dropping to a multi-year low. The fall in vacancy rates has been broad -based across major cities. Net absorption of commercial properties has exceeded supply for 9 of the last 12 quarters (data as of Q2CY26. Source: Nuvama Institutional Equities), highlighting strong demand conditions.

The Nifty Realty Index’s P/B ratio peaked at 6.50x in H1 2024 and has steadily declined since then. At the end of July 2026, the P/B ratio stood at 4.06x, slightly below the 5-year P/B of 4.27x. With valuations closer to long-term averages, it could represent a better entry point for patient long-term investors who wish to deploy lumpsum capital. It could also be appropriate for new and existing SIP investors to continue their investments to accumulate additional units at relatively moderate valuations.

Index valuations have moderated over the last 2 years

Source: Bloomberg, internal calculations. As on Jul 31, 2026

The Nifty Realty TRI has outperformed the Nifty 500 TRI over 3, 5, 7, and 10-year horizons

Source: NSE Indices Ltd. and internal calculations. As on Jul 31, 2026. Past performance may or may not be sustained in the future and is not a guarantee of any future returns. HDFC AMC/Mutual Fund is not guaranteeing or promising or forecasting any returns. *CAGR: Compounded Annual Growth Rate, TRI - Total Returns Index.

Conclusion:

India’s real estate sector continues to progress on a robust long-term trajectory supported by rising urbanization and higher disposable incomes. Residential markets remain healthy, with premium housing emerging as a powerful structural theme. Commercial markets are also showing strength, evidenced by reduced vacancies and steady leasing traction across major metros. Additionally, valuations for the Nifty Realty Index are slightly below its 5-year average. Investors seeking to gain exposure to the real estate sector may consider investing in the HDFC Nifty Realty Index Fund^@.

AUGUST MARKET ROUNDUP

Dispersion in performance of broad market indices

Broad market indices have displayed notable dispersion over the 1 year period, with returns spanning from about 10.9% on the Nifty Next 50 TRI to -2.8% on the BSE Sensex TRI. Midcaps and smallcaps also had varying performance, with the Nifty Midcap 150 TRI returning 9.0% versus the Nifty Smallcap 250 TRI at 5.2% over the same horizon. This divergence is visible across shorter and longer horizons as well, where the 6 month and 3 year returns show shifting leadership across market segments, underscoring the evolving nature of market breadth and investor risk appetite.

Sectoral and thematic returns reflect strong winners and laggards in the past year

Sector and thematic indices have shown even sharper dispersion than broad market indices, with one year returns ranging from barely positive levels, such as 0.1% for Nifty Media TRI, to exceptionally strong outcomes like 38.7% for Nifty Metal TRI and 23.0% for both Nifty Auto TRI and Nifty PSU Bank TRI. Several themes displayed healthy momentum, including defence at 20.7% and manufacturing at 15.8%, while others such as FMCG at -11.1% and IT at -11.2% lagged meaningfully over the same period. This wide spread reflects how market Sectoral and thematic returns reflect strong winners and laggards in the past year narratives, policy cycles, commodity trends, and investor sentiment can create strong winners and losers within sectors at any given time, producing a much more uneven performance landscape than broad indices alone might suggest.

Industry Passive AUM registered net inflows with ETFs capturing the major share!

For the month of July 2026:

Passive AUM stood at Rs. 15.6 lakh crore, accounting for ~18.2% of total industry AUM. The category as a whole witnessed a net inflow of ~Rs. 12,517cr. in July 2026. ETFs accounted for the bulk of the net inflows, receiving a total of Rs. 9,512 cr. over the month of July. Index Fund received Rs. 1536.60 cr. over the same period.

Dicionary term

Source: MFI360 Explorer, Morningstar, Bloomberg, internal calculations. Past performance may or may not be sustained in future and is not a guarantee of any future returns.
Disclaimer: The data/statistics is given for general information purposes only and is not an investment advice. Neither HDFC AMC / HDFC Mutual Fund nor any person connected with them, accept any liability arising from the use of this document. The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice. *Gold and Silver prices in INR do not include any customs duties, local taxes etc. Returns less than 1 year period are simple and greater than 1 year period are compounded annualized (CAGR). § Year to date. Σ Financial year to date.

Source: www.hdfcfund.com N.A. - Not Available. TER - Total Expense Ratio (As at last day of the month). Including Additional Expenses and Goods and Service Tax on Management Fees * Annualised tracking error is calculated based on daily returns for the last 12 months ^Investors in the Scheme shall bear the recurring expenses of the Scheme in addition to the expenses of other schemes in which this Fund of Funds scheme makes investment (subject to regulatory limits)

Disclaimer: The information/data herein alone are not sufficient and should not be used for the development or implementation of an investment strategy. The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully responsible/liable for any decision taken on the basis of information contained herein.

NSE Disclaimer: The above mentioned Schemes offered by HDFC Asset Management Company Limited (HDFC AMC) having benchmark as NSE Indices are not sponsored, endorsed, sold or promoted by NSE INDICES LIMITED (formerly known as India Index Services & Products Limited (IISL)). NSE INDICES does not make any representation or warranty, express or implied (including warranties of merchantability or fitness for particular purpose or use) and disclaims all liability to the owners of the Products or any member of the public regarding the advisability of investing in securities generally or in the Products linked to the respective underlying indices of NSE to track general stock market performance in India. Please read the full disclaimers in the Offer Document of the Products.

BSE Disclaimer: The above mentioned schemes of HDFC AMC having benchmark as BSE Indices are based on the underlying indices of BSE. BSE®, BSE® and SENSEX® are registered trademarks of BSE Limited. The Schemes is not sponsored, endorsed marketed or promoted by BSE or their respective affiliates. Please refer to the Scheme Information Document for disclaimers.

Source: www.hdfcfund.com N.A. - Not Available. TER -Total Expense Ratio (As at last day of the month). Including Additional Expenses and Goods and Service Tax on Management Fees.

∞ The Schemes being an Exchange Traded Fund investing in a specific sector carries higher risks versus diversified equity mutual funds on account of concentration and sector specific risks. * Annualised tracking error is calculated based on daily returns for the last 12 months. And for schemes that have completed less than 12 months, Annualised Standard Deviation (tracking error) has been calculated based on the available data, i.e. since inception. Exit load does not apply on ETFs. ^ Margin available / haircut applied depends on broker.

Disclaimer: The information/data herein alone are not sufficient and should not be used for the development or implementation of an investment strategy. The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully responsible/liable for any decision taken on the basis of information contained herein.

NSE Disclaimer: The above mentioned Schemes offered by HDFC Asset Management Company Limited (HDFC AMC) having benchmark as NSE Indices are not sponsored, endorsed, sold or promoted by NSE INDICES LIMITED (formerly known as India Index Services & Products Limited (IISL)). NSE INDICES LIMITED does not make any representation or warranty, express or implied (including warranties of merchantability or fitness for particular purpose or use) and disclaims all liability to the owners of the Products or any member of the public regarding the advisability of investing in securities generally or in the Products linked to the respective underlying indices of NSE to track general stock market performance in India. Please read the full Disclaimers in the Offer Document of the Products.

BSE Disclaimer: The above mentioned schemes of HDFC AMC having benchmark as BSE Indices are based on the underlying indices of BSE. BSE® and SENSEX® are registered trademarks of BSE Limited. The Schemes is not sponsored, endorsed marketed or promoted by BSE or their respective affiliates. Please refer to the Scheme Information Document for disclaimers.

Riskometer as on July 31, 2026. For latest riskometer, investors may refer to the Monthly Portfolios disclosed on the website of the Fund viz. www.hdfcfund.com

Riskometer as on July 31, 2026. For latest riskometer, investors may refer to the Monthly Portfolios disclosed on the website of the Fund viz. www.hdfcfund.com π Investors in the Scheme shall bear the recurring expenses of the Scheme in addition to the expenses of other schemes in which this Fund of Fund scheme makes investment (subject to regulatory limits).

NSE Disclaimer: The above mentioned Schemes offered by HDFC Asset Management Company Limited (HDFC AMC) having benchmark as NSE Indices are not sponsored, endorsed, sold or promoted by NSE INDICES LIMITED (formerly known as India Index Services & Products Limited (IISL)). NSE INDICES LIMITED does not make any representation or warranty, express or implied (including warranties of merchantability or fitness for particular purpose or use) and disclaims all liability to the owners of the Products or any member of the public regarding the advisability of investing in securities generally or in the Products linked to the respective underlying indices of NSE to track general stock market performance in India. Please read the full Disclaimers in the Offer Document of the Products.

BSE Disclaimer: The above mentioned schemes of HDFC AMC having benchmark as BSE Indices are based on the underlying indices of BSE. BSE® and SENSEX® are registered trademarks of BSE Limited. The Schemes is not sponsored, endorsed marketed or promoted by BSE or their respective affiliates. Please refer to the Scheme Information Document for disclaimers.

MSCI Disclaimer: HDFC Developed World Overseas Equity Passive FOF is not sponsored, endorsed, sold or promoted by MSCI. All MSCI indexes are owned by MSCI and provided as-is without any warranties. MSCI assumes no liability for or in connection with the MSCI indexes. Please refer the Scheme Information Document for complete disclaimer.

CRISIL Disclaimer and Copyright Notice : “© CRISIL Limited. All Rights Reserved Each CRISIL Index (including, for the avoidance of doubt, its values and constituents) is the sole property of CRISIL Limited (CRISIL). No CRISIL Index may be copied, retransmitted or redistributed in any manner. While CRISIL uses reasonable care in computing the CRISIL Indices and bases its calculation on data that it considers reliable, CRISIL does not warrant that any CRISIL Index is error-free, complete, adequate or without faults. Anyone accessing and/or using any part of the CRISIL Indices does so subject to the condition that: (a) CRISIL is not responsible for any errors, omissions or faults with respect to any CRISIL Index or for the results obtained from the use of any CRISIL Index; (b) CRISIL does not accept any liability (and expressly excludes all liability) arising from or relating to their use of any part of CRISIL Indices.

The views are based on internal data, publicly available information and other sources believed to be reliable. The statements contained herein are based on our current views and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Stocks/Sectors referred are illustrative and not recommended by HDFC Mutual Fund (“the Fund”)/ HDFC AMC. The Schemes of the Fund may or may not have any present or future positions in these sectors. It should not be construed as an investment advice or a research report or a recommendation by the Fund/HDFC AMC to buy or sell the stock or any other security covered under the respective sector/s. The Fund/ HDFCAMC is not guaranteeing any returns on investments made in the Scheme(s). Past performance may or may not be sustained in future and is not a guarantee of any future returns. HDFC Asset Management Company Limited (“HDFC AMC”) does not warrant the completeness or accuracy of the information herein. Neither HDFC AMC, nor any person connected with it, accepts any liability arising from the use of this material. The recipient(s) should before taking any decision, should make their own investigation and seek appropriate professional advice.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.