 "Purvankara, Oberoi rally up to 10%; BSE Realty index surges 17% in 1 month")
Shares of real estate companies have rallied by up to 10 per cent on the BSE in Monday’s intra-day trade amid heavy volumes in an otherwise weak market on expectations of the sector being poised for significant growth going forward. Among the individual stocks, Puravankara shares were locked in an upper circuit of 10 per cent at Rs 442.60 on the BSE. Sunteck Realty rallied 5 per cent to Rs 521; Anant Raj Industries (Rs 788.15); Ashiana Housing (Rs 342.50); Mahindra Lifespace Developers (Rs 496.40); Prestige Estate Projects (Rs 1,828); Macrotech Developers (Rs 1,474.75); and Oberoi Realty (Rs 2,206.80) are up 4 per cent, while, DLF (Rs 892.50) and Godrej Properties (Rs 2,973.80) are up 2 per cent on the BSE.
At 11:41 AM, the BSE Realty index, the top gainer among sectoral indices, was up 2.6 per cent, as compared to the 0.52 per cent decline in the BSE Sensex. In one month, the realty index has surged 17 per cent, as against the 5.3 per cent rise in the benchmark index. The BSE Realty index had hit a 52-week high of 9,059.57 on June 18, 2024.
Analysts at HDFC Securities have maintained a positive outlook on the overall residential real estate market, driven by robust end-user demand and the strong execution capabilities of established players. Grade A developers are likely to sustain their dominance, particularly those with extensive land reserves and proven delivery track records. However, for superior growth and stock outperformance in the medium-term, a diversified multi-regional presence will be crucial, the brokerage firm said in a sector update.
Among players in South India, analysts' top picks in the sector remain Prestige Estates and Sobha, given their strong foothold in their home turf and strategic expansion into other high-growth markets. Godrej Properties may not see much impact from Bengaluru, and with the fundraise in place; it may see further re-rating, analysts said.
Grade A developers (particularly Bengaluru players, i.e., Sobha, Prestige, Brigade, and Godrej Properties) are facing challenges due to delays in regulatory approvals. These hurdles are resulting in postponements of planned launches, which, in turn, could lead to supply-side constraints in the residential real estate market in the near-term. Despite these bottlenecks, demand for housing remains robust, driven by resilient end-user interest and favourable macroeconomic factors, HDFC Securities said in a sector update report.
According to Nirmal Bang Institutional Equities, the real estate sector is poised for significant growth, with an expected compound annual growth rate (CAGR) of 9 per cent between FY25 and FY30E to $1 trillion. This growth trajectory is anticipated to elevate the sector's contribution to India's GDP from 6 per cent in FY17 to 13 per cent in FY25E, driven by rising urbanisation, increasing disposable incomes, and heightened demand for residential, commercial, and logistics spaces, besides a growing need for data centers fuelled by advances in the space, the brokerage firm said.
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Meanwhile, in the residential real estate (in tier 1 markets covered in the report), sales are estimated to increase by approximately 13 per cent year-on-year (YoY), while new launches are estimated to increase by approximately 6 per cent YoY in 2024. Post that, sales and new launches are projected to increase at a CAGR of around 10-12 per cent for the next two years. Prices over the same period are also likely to remain on an upward trajectory, with estimated growth of 7-9 per cent YoY, Oberoi Realty said in a qualified institutional placement (QIP) issue document.
India's economic growth story continues to captivate the world, and the real estate sector has been a key beneficiary of this positive momentum. "With a robust launch pipeline, we are well-positioned to capitalise on the growing demand for premium residential properties and drive sustainable growth," the company’s management said.