Investor interest in realty stocks appears to be picking up, with delivery volumes improving for BSE Realty Index stocks ever since the index hit a 52-week low on February 25.

The realty majors had seen their delivery percentage (DLF, Unitech, HDIL and the like) go down to single digits around that point in time. They have now bounced back and delivery percentage is in the range of 15-25 per cent.

“This is not short covering but a clear sign of a build up in cash volumes of the larger realty stocks though the overall market sentiment on the sector may be negative,” said a technical analyst from an Indian brokerage.

It is noteworthy that the realty sector had touched its 52-week low well ahead of the last correction in the Nifty that had seen the index touch the 5,100-levels.

“The market has discounted all the negatives for the real estate sector and it is quite possible that it would relatively outperform other sectors over the next one month,” said another analyst.

DLF, for instance, sold 400 plots for Rs 700 crore in line with its strategy to focus on selling plots (as compared to group housing) to generate faster cash flows. This is a strong signal that realty companies are selling land banks to reduce debt, said experts.

“DLF's de-leveraging strategy has kicked off well with the successful plot sales in New Gurgaon and positive news flow on IT parks monetisation. We anticipate a gradual recovery and further positive news flow,” Mr Prakash Agarwal an analyst with RBS, said in a research report.

But many of them are yet not convinced that real estate stocks could actually give positive returns. The stock which had not seen any decline in its price even through the downturn is Godrej Properties.

“There are issues of corporate governance in real estate companies and since a lot of cash dealings are involved in obtaining clearances, one cannot rely on their numbers. Hence we do not cover the sector,” said Mr Rajeev Thakkar, CEO, Parag Parikh Financial Advisory Services.

The BSE Realty index closed at 2156.83 points on Monday, up 3.66 per cent over its previous close.

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