Realty stocks add 30% gains in the first week of 2024; what’s buzzing?
The S&P BSE Real Estate index gained more than 8% in a week, and the gauge hit an over 15-year high of 6820.59 points. Godrej Properties, The Phoenix Mills, Prestige Estates Projects, and Sobha gained 11-30% so far this week. While, Mahindra Lifespace Developers, Oberoi Realty, and Macrotech Developers added 6-8% this week.
Sobha saw total sales in the quarter ended December increase by 37% year-on-year to Rs 1,952 crore, according to the provisional update given by the company. For the nine months ended December, the total sales were Rs 5,140 crore compared to Rs 3,734 crore a year ago. In fact, the company saw its highest-ever quarterly sales of 1.25 mln sq ft in the quarter.
Analysts expect luxury real estate project growth to continue unabated on the back of the rising spending power of the Indian upper middle class. Further, affordable real estate is seen picking up once interest rates start trending lower from current levels and the rural economy revives. With inventory levels at sub-1-year levels in NCR and Bengaluru; the two markets have seen continued strong offtake of new launches, Jefferies noted.
The brokerage expects 68-85% of its FY24 forecast to be met already looking at the pre-sales trend of Q3.
“Given seasonal strength in 4Q; upgrades are likely. However, the launch pipeline needs to be monitored closely for the estimated upgrades given low inventory levels,” the brokerage said.
In 2023, realty was the top-performing sector, with the index surging 74%. Stocks like Anant Raj, DB Realty, Prestige Estates, Puravankara Ltd, Peninsula Land, and Unitech gave multibagger returns in 2023. After such a strong run, several stocks are trading well above the long-term average. While strong pre-sales keep the implied forward earnings multiples relatively lower; anticipation of a strong residential cycle continuing over the medium term is now getting built into the valuation, Jefferies said.
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