The sectors that have benefited the most from the end of the COVID phase include the real estate sector. With the situation returning to normal, people have started implementing their delayed plans to buy houses. However, the demand is currently higher in the luxury segment.
With the increase in property sales, real estate companies have started recovering from a difficult phase. Their balance sheets have strengthened, and they have begun launching new projects. All of this is reflecting in the performance of real estate shares.
The Nifty Realty Index has witnessed a surge of approximately 25% in the past two months. It is currently trading near its 16-month high. In comparison, the Nifty 50 has only experienced a growth of around 6.5%. The top 3 contributors to the Nifty Realty Index are Sobha Limited, DLF, and Mahindra Lifespace Developers.
Real estate company shares have been consistently rising. Speaking about individual shares, Sobha Developers’ shares have witnessed an increase of approximately 32% in the past two months, reaching a level of ₹567 on June 2, 2023.
Similarly, there has been a good momentum in the shares of Macrotech Developers, Lodha Group’s company. These shares have witnessed an increase of approximately 21% in the past two months. On June 2, 2023, the share closed at ₹555. The company has expressed confidence that due to strong fundamentals and consolidation in the supply, it can achieve a medium-term Compound Annual Growth Rate (CAGR) of around 20%, indicating annual growth. Analysts suggest that the real estate sector can continue to perform well in the future.
Due to consistent demand and new launches, their pre-sales are showing significant growth. In the financial year 2023, these companies witnessed a year-on-year increase of 43% in pre-sales.
High interest rates
High-interest rates do not seem to have any impact on inquiries or footfall in the real estate sector. Due to the favorable affordability situation and a large population still lacking housing, these companies expect good growth in the medium term.
According to Motilal Oswal Financial Services, due to consistent demand, sales for these companies can witness an increase of 15% to 20% in the medium term. Motilal Oswal has expressed the possibility of rating upgrades for companies that have strong business operations and good cash flow prospects, indicating expectations of future growth.
Top companies
Now let’s take a look at how these top companies performed in the fiscal year 2023. In recent quarters, real estate companies have shown significant business performance. The fourth quarter of real estate companies has been positive in terms of earnings, and there is confidence that the Reserve Bank will not increase interest rates further. This gives hope for sustained demand in the real estate sector.
According to a report by Anarock, the value of residential real estate transactions reached up to ₹3,46,960 crores in the previous fiscal year. Similarly, the number of sales increased by 36% to reach 3,79,095 units.
In metropolitan regions like Mumbai, Pune, Bangalore, and Hyderabad, sales witnessed an increase of 45% to 50%.
Godrej Properties has added new projects worth ₹32,000 crores, while the Lodha Group has added projects worth ₹19,800 crores. To maintain their growth, these companies have made significant preparations for the fiscal year 2024. Companies like DLF, Godrej Properties, and Macrotech Developers are showcasing a strong launch pipeline, fueled by the enthusiasm generated by new bookings.
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