The Nifty Realty index has been one of the best performing benchmarks in FY24, rising 2.3 times or delivering absolute returns of over 132 per cent in the fiscal year, as demand for housing continued through the year and the office sector also showed decent absorption.

The rally in the real estate stocks has also prompted Motilal Oswal Asset Management to launch an exchange traded fund based on the sector, the first such fund tracking real estate stocks.

A quick look at the performance of the index over the last five years shows that real estate stocks have been surging since the pandemic struck, barring 2022 when it dipped on a higher base.

In calendar 2020, the index rose a modest 4.8 per cent, and in 2021, it showed a sharp rise of over 54 per cent. After the fall, in 2023 it rose over 81 per cent, while in the first three months of this year, it has increased by over 15 per cent.

The constituents of the index have shown a remarkable price rally in the fiscal year, with some such as Sobha Ltd and Prestige Estates Projects trebling and other such as DLF, Godrej Properties and Phoenix Mills more than doubling.

Despite higher interest rates (compared to three years ago) and a general rise in home prices, demand for homes has continued with developers incentivising buyers with easy payment terms and freebies. In 2023, homes sales had risen just under a third at 4.8 lakh units in the top seven cities in the country, according to Anarock Research and in the first three months of 2024, sales rose 14 per cent to 1.3 lakh units.

Property prices have risen 7-20 per cent across cities according to data from various analysts and reports.

The data shows that half of the demand for housing is coming from the Mumbai Metropolitan Region and Pune, which is dominated by organised players who have access to funds.

Analysts expect the sales momentum to sustain in the medium term though in some pockets there are signs of buyer fatigue. While the numbers for March are awaited, in February there was a fall in sales in the National Capital Region. According to Nuvama Research, demand has seen a decrease in both NCR and Chennai year-to-date.

While most of the constituents of the realty index are focused on the residential sector, there are some, like Prestige Estates and Brigade Enterprises, that have a significant office portfolio.

The office sector in India has shown decent absorption in the last couple of quarters. It was close to 60 million square feet in 2023 and according to Cushman & Wakefield, the first quarter of 2024 ended with gross leasing volume of 20 msf, up by a third year-on-year, led by Mumbai and Bengaluru.