Real Estate shares rally on Modi 3.0 boost; Nifty Realty index soars 6%

According to analysts, the BJP's manifesto mentioned affordable housing as one of the key focus areas, among others, which could keep real estate players in the pink of their health

Real estate shares rally: Shares of real estate companies were flying high on the bourses on Monday, June 3, in-line with an overall bullish sentiment in the stock markets. Equity markets were on a roll on June 3 after exit polls unanimously predicted the clear majority for the ruling party National Democratic Alliance (NDA) and forecast the third term for Prime Minister Narendra Modi.

The Nifty Realty index soared 6.2 per cent to hit a multi-year high of 1,082 level in the intraday trade on the National Stock Exchange. The index closed at 1,059.60, up 5.9 per cent, with individual stocks like Prestige Estate Projects, Brigade Enterprises, Godrej Properties, Phoenix Mills, and DLF up in the range of 6.6 per cent to 8 per cent.

 

Share prices of Lodha (Macrotech Developers), Oberoi Realty, and Sobha, meanwhile, rallied up to 3 per cent. By comparison, the benchmark Nifty50 index ended 3.25 per cent higher at 23,264.

According to analysts, the Bharatiya Janata Party's (BJP's) manifesto mentioned affordable housing as one of the key focus areas, among others, which could keep real estate players in the pink of their health.

The focus of Modi 3.0, according to analysts at Axis Securities, will likely continue on developing the country's public infrastructure such as roads, water, metro, railways, defence, digital infrastructure, and green technologies.

"Its overall focus would also be on creating more jobs and achieving investment-driven growth. Furthermore, the private Capex, which has been sluggish for the last several years, is expected to receive a much-needed push in the upcoming years," it said.

Fundamentally, the real estate sector continues to witness strong demand undercurrent with real estate developers reporting record presales during Q4FY24. Sobha reported pre-sales of Rs 1,500 crore,(growth of 3 per cent Y-o-Y), Prestige of Rs 4700 crore (growth of 21 per cent Y-o-Y), Macrotech Developers (Rs 4210 crore, up 39 per cent Y-o-Y), and GPL (Rs 9,500 crore, up 135 per cent Y-o-Y).

"We expect this momentum to continue in Q1FY25 as multiple new launches are planned by developers," said analysts at HDFC Securities.

Whilst a higher mortgage rate has the potential to hit affordable and mid-income housing demand, the brokerage said, luxury demand remains indifferent as the luxury segment is driven by the wealth effect.

"The sector will see massive fundraise over FY25, which could be due to equity fundraise or asset divestment. Growth from here on will be contingent on diversification beyond existing markets into newer markets and this shall require investment in new land banks/JDA/JVs. With robust balance sheets, low cost of capital and strong brands, organised players are at an advantage in adding new BD and are positioned for further market share gains," the brokerage added.