Realty index outperforms Sensex; is it right time to add stocks from the sector?
Logging in gains of around 10%, the BSE Real Estate index has already outpaced the benchmark BSE Sensex on a year-to-date basis.
With recovery in economic activity slowly taking shape, market experts believe this is the right time to pick quality real estate stocks.
Logging in gains of around 10%, the BSE Real Estate index has already outpaced the benchmark BSE Sensex on a year-to-date basis. The 30-share index has advanced 6% since January 1.
While the entire realty pack has witnessed a sharp price uptick in the recent past, brokerage Edelweiss Securities believes that real estate stocks are attractive from a medium-term perspective considering rising consolidation. Realty major DLF has gained the most in 2021 so far.
The scrip has rallied 31.20% to Rs 305.50 on February 5 from Rs 232.85 on December 31. However, the stock is still down 75% from its all-time high of Rs 1,225.
Other real estate majors like Mahindra Lifespace Developers, Sobha, Brigade Enterprises, Prestige Enterprises and Phoenix Mills have also gained between 3%-26% YTD. However, these counters are still down up to 80% from their respective all-time highs.
“With investors getting increasingly confident about housing sales trajectory, we believe the next leg of re-rating can come when leasing and consumption normalise in the office and retail space, respectively. Hence, we prefer DLF and Brigade Enterprises,” Edelweiss Broking said in a report.
The sector is also buzzing on the back of robust sales witnessed in December. The month saw highest-ever demand in over a decade, led by decadal-low interest rates, attractive festive schemes offered by developers, and stamp duty cuts (in Mumbai and Pune).
Overall (top-7 cities) demand grew 13% MoM and 54% YoY to 44.2msf. In terms of units, the month clocked sale of 41,460 units. The closest that this level was last achieved was in November 2010 (peak of the previous real estate cycle) with sales of 36,629 units.
“The growth in December 2020 was led by MMR (up 120% YoY) and Pune (up 75% YoY), fuelled by the stamp duty incentive announced in the state of Maharashtra (3% cut in stamp duty rate between September-December 2020),” Edelweiss said.
Commenting on the announcements made in the Union Budget and its impact on the sector, Anuj Puri, Chairman-ANAROCK Property Consultants said: “Affordable housing and rental housing got a big boost with the government extending the period for extra deduction of Rs 1.5 lakh available for loans up to March 31, 2022. This will keep demand buoyant for affordable housing in 2021 as well. Further, the extension of the tax holiday for affordable housing projects for one more year will help bring in more new supply within this segment.”