With realty being in a sweet spot, shares of India’s top listed real estate companies have surged by anywhere between 50–80 per cent in the past 12 months on the back of robust property sales and sharp rise in net profits, helping the BSE Realty index outshine the broader benchmark Sensex.     

Investors have aggressively bought shares of property companies as the upswing in the Indian real estate market continues post Covid. The BSE Realty Index grew by 53.66 per cent in the last one year, outperforming the BSE SENSEX, which grew by 6.79 per cent y-o-y. 

Companies 52 week high YoY % growth
Godrej Properties1,879.0043.62%
Prestige Estates925.0092.96%
Macrotech Developers 879.9071.15%
Oberoi Realty1,344.2050.15%
Brigade Enterprise749.8548.99%
Phoenix Mills2,366.4050.51%

Developers anticipate robust demand for the next two to three years, helping listed real estate firms sustain the re-rating in the equity market. This is in contrast to previous periods (post-2014) when there was a supply gut, which put a lid of property prices as demand failed to keep pace.    

Vimal Nadar, Senior Director, Research, Colliers India, states, “The growth is attributed to prevailing market sentiment, supported by upbeat homebuyer attitudes, stable disposable income, appropriate pricing, and favourable long-term interest rates, showcasing a new upcycle in the sector.”

In fact, Anuj Puri, Chairman, ANAROCK Group, sees the listed developers leading the wave and experiencing significant growth in new supply each quarter.  Echoing a similar thought Venkat K Narayana, CEO, Prestige Group in a recent interaction with businessline agreed that it is the beginning of a new uptrend cycle in the real estate market.   

For instance, DLF, Prestige Estates, Godrej Properties, Oberoi Realty, and more have reported a remarkable improvement in Q2 financial performance, with the 7 biggest players (in terms of Mcap) showing a 119.74 per cent y-o-y increase in consolidated net profits. Further, the quarter also holds the record for the highest sales for many companies.    

Interestingly, according to Puri, since new supply in the mid and premium segments has been dominated by large and listed developers, buyer demand has also seen an uptick with the preferences for more branded products. “This has led to considerable improvements in these developers’ stocks,” he added.    

Demand drivers

Additionally, there are two new demand drivers at play: the return of long-term investors to the housing market and the arrival of millennials as convinced home buyers. “Notably, fence-sitters and investors also saw this as an opportune moment to invest in residential real estate, be it for self-use or for pure-play investment purposes,” Nadar said. 

Further, even the leading financial services companies maintain a positive outlook towards the sector at large. According to Motilal Oswal Financial Services, despite the recent run-up in real estate stock prices, “we remain positive about select companies, which can continue to report 15-20 per cent growth, driven by their ability to sign new projects through their strong cash generation potential.”  

Prior to this, 2014 was considered to be the peak year for the sector. Data from ANAROCK Research showed that in the last decade, 2014 (all four quarters collectively) was the peak year, which saw the highest yearly sales of approximately 3.43 lakh units across the top 7 cities. “In contrast, the first nine months of 2023 alone saw total sales of more than 3.49 lakh units across the top 7 cities, already more than the previous peak year of 2014,” noted Puri. 

According to Vivek Rathi, National Director Research, Knight Frank India, the new upcycle in the Indian real estate sector, particularly the housing segment, began in 2020 as the pandemic experience accentuated the sense of home ownership among people. “The September quarter has been declared as the best sales quarter for many listed and unlisted players, with an expectation of the December quarter which is likely to record an even higher level of market activity,” he added.