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Select realty players like Sobha, Indiabulls Realty, Mahindra Lifespace and DLF have gained between 150%-225% since March lows of 2020
Real estate stocks are riding a crest. Experts believe the recovery of economy coupled with low-interest rates and strong demand for residential housing are the factors behind the surge.
Data available with Ace Equity showed that select real estate players like Sobha, Indiabulls Real Estate, Mahindra Lifespace Developers, DLF and Godrej Properties have gained between 150%-225% since March lows of 2020. On the other hand, the benchmark BSE Sensex gained 89% to 50405 during the same period.
“Consolidation is the driving feature of India’s property space and Covid-19 has only accelerated the process. We believe housing demand will remain robust in the near-term aided by improving affordability,” Edelweiss said in a report.
The realty stocks look attractive to the broker from a medium-term perspective considering rising consolidation.
“With investors getting increasingly confident about housing sales trajectory, we believe the next leg of re-rating can come when leasing and consumption normalise in the office and retail space, respectively. Hence, we prefer DLF and Brigade Enterprises,” it said.
Residential sales witnessed 51% sequential growth in the last quarter of 2020, according to the recent report ‘India Real Estate Outlook – A new growth cycle’ by JLL.
“In Q4 2020, uncertainties around the economy and jobs started reducing, which led to an increase in the pace of recovery in residential real estate. New launches and sales across the seven key markets under review witnessed a significant jump,” said Samantak Das, Chief Economist and Head Research & REIS, JLL.
Brigade Enterprises (up 149%), Sunteck Realty (up 89%), Prestige Estate (up 76%), Phoenix Mills (up 46%) and Oberoi Realty (up 32%) stood among other major gainers in the real estate space. The BSE Realty index has advanced 115% since March 24, 2020.
JLL further added that government initiatives to support the recovery by holding policy rates at historically low levels to initiate a cycle of consumption-led growth. This has resulted in extremely low mortgage rates. And, prices have also been stagnant for the past few years. This affordable synergy makes it a great time to purchase a home. Furthermore, the market is also witnessing renewed interest from Non-Resident Indians (NRIs) impacted by economic uncertainties in Europe and the Middle East.
AK Prabhakar, Head of Research, IDBI Capital Market believes that it is a good time to invest in quality real estate players. On the other hand, G Chokkalingam, Founder, Equinomics Research and Advisory said, “Investors can invest in stocks like Nesco and Oberoi Realty which have strong balance sheets.”
On the other hand, brokerage Sharekhan is positive on Mahindra Lifespace Developers with a price target of Rs 655, owing to a high discount to NAV and a strong growth outlook.