Nifty Realty up 13% so far in April; Godrej, DLF, Oberoi zoom up to 27%

With a decline in interest rate, sustained affordability and gradual price hikes, the analysts expect industry growth to be back on track.

Shares of real estate companies continued their upward movement with the Nifty Realty index gaining 2 per cent on the National Stock Exchange (NSE) in Tuesday’s intra-day trade on a constructive outlook on the sector.

At 01:08 pm; Nifty Realty index, the top gainer among sectoral indices, was up 1.8 per cent as compared to 0.02 per cent decline in the Nifty 50. Thus far in the month of April, the realty index has rallied 13 per cent as against a 1.8 per cent rise in the benchmark index.

Among the individual stocks, Sobha surged 8 per cent to Rs 436 in intra-day trade. Godrej Properties, DLF, Indiabulls Real Estate and Oberoi Realty were trading higher in the range of 2-3 per cent.

Thus far in the April, the market price of Godrej Properties has zoomed 27 per cent, while DLF soared 19 per cent and Oberoi Realty and Prestige Estates Projects rallied 12 per cent each.

The outperformance of the realty sector was on the back of robust sales posted by realty developers in the March quarter of financial year 2022-23 (Q4FY23). While the Reserve Bank of India’s (RBI) surprise rate pause also restored hopes of firm growth trajectory of the industry.

Godrej Properties announced that it saw the highest-ever quarterly and annual sales in the quarter. Sobha Developers posted its highest annual sales of Rs 5,198 crore in FY23. In Q4, the company said it achieved its highest-ever quarterly sales value, a rise of 2.7 per cent over Q3FY23 and 31.9 per cent compared to the corresponding period last year.

Similarly, in an exchange filing, Macrotech Developers said it achieved best-ever annual pre-sales performance of Rs 12,064 crore. And it posted pre-sales worth more than Rs 3,000 crore for the third consecutive quarter in Q4. Mumbai-based Ajmera Realty said it recorded a sales value of Rs 140 crore in Q4FY23, an increase of 10 per cent sequentially. It said it achieved its best-ever sales performance in FY23, almost double that of the previous fiscal.

With a surprise pause in rate hike by the RBI in its April 2023 policy meeting, economists believe that the probability of any further rate hikes is minimal and there might even be a rate cut from late-CY23. Thus, interest rate hikes are unlikely to be a dampener from hereon, said analysts at Motilal Oswal Financial Services (MOFSL) in a sector update.

With a decline in interest rate, sustained affordability and gradual price hikes, the brokerage firm expects industry growth to be back on track. “We forecast the industry to report at least 5-10 per cent growth in CY23 and beyond. With scale-up in new launches from FY24 onwards and specific focus on expanding into at least two more markets, we expect the pre-sales growth to sustain at least at 15-20 per cent over the next 2-3 years,” MOFSL said.

Analysts at ICICI Securities anticipate residential sales momentum to remain healthy amid sustained demand and new launch offtake despite rate hikes. However, the trend will be mixed led by respective player new launch momentum.

“In Q4FY23, for real estate companies, sales volume growth is likely to be healthy, led by launches. The commercial leasing as well as malls and hospitality segment will be robust, with consumption remaining healthy,” the brokerage said in a result preview.