BSE Realty index hits 11-year high, posts biggest single-day gain in 4 yrs

Spurt in sales, improved outlook buoys shares of most realty firms

The BSE Realty Index, a gauge for the performance of real estate stocks, hit a 11-year high on Wednesday. The gauge posted its biggest single day gain in over four years as a spurt in property registrations and low home loan rates triggered hopes of demand revival for the sector.

Adding to Tuesday’s 3.5 per cent gain, the 10-share BSE Realty index rose 8.4 per cent to end at 3,621, a level last seen in November 2010. While, the 8.4 per cent jump was the most since April 17, 2017 when the index had risen 8.9 per cent.

Shares of Godrej Properties zoomed 13 per cent, DLF rose 11.6 per cent and Indiabulls Real Estate surged 8.9 per cent amid across-the-board buying in realty shares.

Real estate developers, analysts and consultants said the low interest rates on home loans will boost sales of residential properties in the upcoming festive season, which accounts for a major portion of yearly sales.

Investors were enthused by early signs of demand pick up. In note, Motilal Oswal said Mumbai was likely to see 7,000 property registrations in September 2021, most in a decade. Already, over 6,000 units have been registered in the first 21 days of September, it said. Godrej Properties on Wednesday said it has achieved sales of Rs 575 crore in a single day at the launch of the second phase of its project Godrej Woods in Noida.

A survey by JLL–RoofandFloor said over 80 per cent of prospective buyers are likely to make a purchase within the next three months.

Niranjan Hiranandani, managing director of the Hiranandani group said lower rates will certainly boost home sales.

“The current time has been correctly identified as one of unprecedented opportunity, where high demand and low property rates coincide. The 2021 festive season will set a new benchmark where the entire industry pulled together to harness latent demand for homes,”added Anuj Puri, chairman, Anarock Property Consultants.

The BSE Realty index has gained 45 per cent this year, outperforming the Sensex which has risen 23 per cent. Between 2010 and 2020, the sector has hugely underperformed the market. However, experts feel this could be a start of a new bull run.

“During the last bull run that started in 2004, home loan rates were around 6 per cent. We are once again at similar levels. Furthermore, there have been excellent salary increments in the IT sector. Most of the new real estate demand is in Bengaluru, Gurugram, Noida, Hyderabad comes, where IT professionals are based. After clubbing both these factors, one can say the bear run in the real estate sector is ending after 10 years and it is the beginning of a new bull cycle,” said Amit Jain, Chief Strategist-Global Asset Class and Co-Founder, Ashika Wealth.

Experts say the real estate sector has also been a key beneficiary of several government initiatives such as cut in stamp duty in some regions, introduction of sector regulator Rera, schemes for low- and mid-come buyers. Also, the work-from-home phenomenon too is seen as a big demand driver.

“We expect that this sector will outperform in coming years wherein the companies that are looking promising right now DLF, Oberoi Realty, Godrej Properties, and Sobha. Even investors can also keep an eye on housing finance stocks such as GIC Housing Finance, PNB Housing Finance,” said Ankur Saraswat, Research analyst, Trustline Securities.