Realty share price target

OUR TOP POSITIVE PLAYS Prestige Estates; Signature Global

OUR TOP 9 TRADING BUYs Earnings Play: Bajaj Finance, Ultratech Cement, Max Healthcare, Trent, Indian Hotels, Oberoi Realty, Lupin, Kalpataru Projects and Ethos limited

For most Indian families, real estate and gold have long been the de facto route for their savings and investments. While gold prices have moderated in the first half of FY24, realty stocks have skyrocketed. The Nifty Realty index has given returns of 36% in the past six months, outperforming the broader Nifty 50’s relatively modest 10.6%.

The S&P BSE Realty Index has risen sharply by ~39% over the last six months as concerns over rising mortgage rates impacting demand have been addressed by all companies in our coverage universe clocking record residential sales bookings in FY23 (up 43% YoY in value terms).

The buoyancy continues

Buoyancy in demand continues

Since Jan’23, global macro headwinds in the form of rising interest rates and tech MNC hiring slowdown (MNCs account for 67% of Indian office space demand) have led to a slowdown in large leasing decisions for the moment.

Since Jan’23, global macro headwinds in the form of rising interest rates and tech MNC hiring slowdown (MNCs account for 67% of Indian office space demand) have led to a slowdown in large leasing decisions for the moment.

Strong fundamentals, favourable macros drive sector outperformance

Robust demand and pause in policy rates drive outperformance

The BSE Realty Index has corrected 16% in the last six months owing to concerns over residential demand being impacted by rise in housing mortgage rates in India which have risen by 240-250bps in YTDFY23 to ~9.2-9.3% implying an 18-22% increase in home loan EMIs.

Indian office REITs had a tough time over FY21-22 owing to multiple Covid waves impacting portfolio occupancies by 500-900bps. Over 9MFY23 (Apr-Dec’22), the outlook appeared to be improving with the waning of Covid leading to increased physical footfalls across offices, occupiers going ahead with their expansion plans and pre-commitments, and market rentals also improving in high single digits in preferred micro-markets.

Resilient demand, supply catching up

The Indian Commercial Real Estate (CRE) office market saw Q3CY22 (Jul-Sep’22) net absorption of 8.7msf vs. Q2CY22 (Apr-Jun’22) net absorption of 9.6msf.

The Indian Commercial Real Estate (CRE) office market saw Q3CY22 (Jul-Sep’22) net absorption of 8.7msf vs. Q2CY22 (Apr-Jun’22) net absorption of 9.6msf.