Nifty Realty index has outperformed the benchmark Nifty 50 index throughout the month of July, surging 17% so far. The true estate index was up 2.51% on Thursday, inching closer to a fresh 52-week higher, helped by a sharp up-move in stocks such as India Bulls Real Estate, Phoenix, Prestige, and DLF. Real estate stocks have been gaining momentum as the sector emerges out of a multi-year consolidation. “The Real Estate sector has gone through a supply and demand side consolidation phase over the last few years, which is now starting to benefit the large developers,” Ujjawal Kumar, Analyst, Green Portfolio told TheSpuzz Online.
Real Estate stock efficiency in July
*Indiabulls Real Estate – up 40.20%, at Rs 165 apiece
*Phoenix Mills – up 7%, at Rs 870 per share
*Brigade Enterprises – up 15%, at Rs 320 apiece
*DLF – up 18.2%, at Rs 332.45 per share
*Godrej Properties – up 12%, at Rs 1,566 apiece
*Oberoi Realty – up 13%, at Rs 689 per share
*Sobha Ltd – up 28%, at Rs 602 apeice
*Sunteck Realty – up 27%, at Rs 371.85 per share
What’s altering for true estate sector?
“Economy slowly opening up is ensuring the return of the retail customers to residential purchases that was in a state of a lull. Also, WFH is fuelling home upgrades in urban markets which is prompting mid-segment home buying,” stated Suresh Rangarajan – CEO & Founder of Colive. “The continued lower interest rates on mortgages is another factor. With all these positive signs there are strong real demand factors that are driving up the stocks,” he added.
The multi-year consolidation and now the cyclical recovery in the Real Estate space has not gone unnoticed. Jefferies’ Global Equity Strategist, has also voiced his optimism on India’s true estate stocks going forward. Chris Wood, earlier this year stated that the scale and duration of the prior downturn in true estate is why he expects the new housing cycle to last at least 5 years as soon as it gets going.
According to information sourced by Knight Frank considering the fact that the starting of this year, new launches have shot up by 71% on-year and sales have spiked 67%. Further, the conducive atmosphere made by modifications in policy is developing customer self-confidence in owning the asset, Vijay Agrawal- Executive Director, Equirus Capital told TheSpuzz Online. “The decline in repo rate, stamp duty and ready reckoner rates have been key factors improving the consumer sentiment for purchasing new properties” he added.
Has the Nifty Realty index run up also substantially?
Although Nifty realty has gone up analysts do not think the rally is more than however. “The market will see more uptick in Real Estate stocks due to higher velocity in sales. This will improve results of Real Estate Companies. Hence market has still headroom for upward price correction,” stated Vijay Agrawal.
He added that stocks such as DLF, Godrej Properties, Embassy, Oberoi Properties, Brigade, Purvankara, Sobha, Prestige, and Indiabulls Real Estate would be fantastic to have in the portfolio from the Real Estate sector. On the other hand, Ujjawal Kumar is hunting to bet on providers that are pretty prudent in capital allocation (low on debt) and treat land as a raw material. “To that extent companies like Ashiana Housing, Eldeco Housing are some of our bets on the small and midcap side. On the large-cap side we believe Oberoi Realty and Godrej Properties look interesting,” he added.
(The stock suggestions in this story are by the respective analysis and brokerage firms. TheSpuzz Online does not bear any duty for their investment tips. Please seek advice from your investment advisor prior to investing.)