Real estate stocks have recovered over the past few sessions and hopes of listed firms emerging as beneficiaries as lower interest rates and the Covid pandemic fuel demand from the increasingly prosperous middle class.
NS BSE Realty Index It has gained almost 10% in the last five sessions and is up over 35% this year (Y-to-date). Analysts say the Nifty Realty Index has broken the 10-year consolidation and there are several positive triggers for the sector to outperform.
Lower interest rates, government support and consolidation in the industry are acting as major catalysts for change in the sector after RERA. Besides this, market observers also expect the unlocking theme, IT hiring and rise in salary levels to act as triggers for residential space.
“The IT sector is witnessing strong growth momentum which is creating new jobs in the economy while wage levels in this sector are also rising. Increase in pay level, work culture as well as other tailwinds discussed above are helping in the shift to residential location. The economy is seeing a strong recovery and the unlocking theme is gaining momentum, while work from culture may not last forever, therefore, I believe commercial real estate will also pick up momentum sooner or later. Will take,” said Santosh Meena, head of research, Swastika, Investmart.
Analysts believe that the bullish momentum in the real estate sector marks the beginning of a new boom after a decade of poor performance. Listed companies have gained market share in new launches in the last 2-3 years, and this trend is expected to continue amid expectations of the residential market to perform well in the near future.
“Most of Sobha’s residential pre-sales come from Bangalore market which is one of the IT hubs in India. We expect the new recruitment by the IT industry to drive residential demand in Bangalore, Pune and Chennai. We have seen a strong consolidation in the top – 10 cities in India towards organized players after demonetisation, RERA, IL&FS crisis,” said Yash Gupta, Equity Research Analyst, Angel Broking.
India’s property market has been going through a recession for the past six years, as demand for new homes and apartments has been hurt by the pandemic, a bad-credit crisis and a surprising 2016 cash embargo.
Santosh Meena said, “Sobha is our top choice on the back of our diversified portfolio and greater visibility of growth.” He expects Bangalore-based Brigade Enterprises to also outperform due to the growth in the IT sector, while Godrej Properties, Prestige and Kolte Patil are the other favourites. Continuing neutral outlook on Godrej Properties.
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