Indian realty stocks have had a good run on the bourses for nearly a year now even as both the Nifty Realty and the S&P BSE Realty indices hitting new highs. The S&P Realty index saw a 63 per cent jump between January 1 and December 10 this year while the Nifty Realty index jumped by a little over 60 per cent during the same period.

The bullishness comes on the back of increased demand despite the possibility of a 5-10 per cent hike in end-user price (primarily because of costlier raw materials), launch of new projects, and reduction in unsold inventory. Reduced Covid load is another factor.

Major players who are part of both the realty indices – DLF, Godrej Properties, Sobha Realtors, Oberoi Realty, among others – have seen their stock rise between 47 per cent and over 100 per cent in these 11-odd months. (Sobha’s stock rose 122 per cent during this period)

According to Anuj Puri, Chairman, Anarock Group, a bull-run is being witnessed not only in the real estate stocks but also in the broader market.

“There is ample liquidity in the system which is finding its way into the stock markets due to expectations of good returns as Covid-19 seems to be receding and businesses are back on track. Real estate stocks in specific are booming as the sector seems to be coming out of the woods and developers are garnering good sales and launching new projects,” he told BusinessLine .

The S&P BSE Realty index, which was at 1,427.65 on March 25, 2020 (just after the announcement of the nationwide lockdown), closed at 4,081 on December 10, recording a near 186 per cent rise.

“The phenomenal momentum in the overall real estate market is clearly visible in the index movement,” Puri said.

Shriram Properties’ ₹600-crore initial public offering ended with 4.6 times subscription on its final day, led by demand from retail investors.

Launches

Across seven major cities of India, nearly 1.63 lakh units have been launched between January and September 2021 (the first nine months of the calendar year), 27 per cent higher than the full-year supply of 2020.

Against this, around 1.45 lakh units were sold during this period, 5 per cent greater than 2020’s full year (annual) sales.

“This depicts home buyers confidence about the future and are looking to close deals,” Puri said.

For instance, Godrej Properties on December 6 announced that it has entered into a joint venture with TDI Group to develop an ultra-luxury residential project in Connaught Place in New Delhi. The project is estimated to have a development potential of approximately 1,25,000 sq ft sale area that comprise residential apartments.

On the other hand, DLF management during its post results presentation said it planned launches of 7.7 million sq ft across home, premium residential units, commercial projects, etc. in second half of FY22.

The first phase of its Midtown West – a premium residential complex in Delhi’s Moti Nagar – is expected to be launched soon with a revenue potential of ₹12,000-15,000 crore. The super luxury housing project, Camellia’s, is witnessing “increased sales” (record sales of ₹1,034 crore across 34 units).

New sales bookings for DLF in the super luxury segment stood at ₹1,512 crore for the quarter-ending September 30, 2021. “The monetisation of our completed inventory across markets continues to gain traction,” the company said indicating improved demand condition.

High Demand

The housing demand is high as people are spending more time at home due to remote working. Macro conditions are also supporting home purchases with interest rates on home loans being at a decadal low, starting at 6.5 per cent.

The sector is in a consolidation mode and large players are commanding a significant share in the overall area sold.

Data from Anarock further suggest that the country’s nine of the larger listed real estate developers in India (Sobha, Puravankara, Prestige Estates, Brigade Enterprises, Mahindra LifeSpaces Developer, Godrej Properties, Oberoi Realty, Kolte-Patil Developers and Macrotech Developers/Lodha Group) clocked cumulative revenues of ₹14,883 crore in the first six months of FY22 (April to September), up 57 per cent y-o-y (₹9,483 crore).

In H1FY22, the residential market's September-quarter performance was better than the previous three months.

Unsold units till September-end stood at 6,50,000, seeing a decline 17 per cent over the previous peak that the sector witnessed in 2016.

On Monday, the Sensex was down over 500 points or 0.86 per cent at 58,283.42, and the Nifty was down 143.05 points or 0.82 per cent at 17,368.25. Sectoral indices traded mixed wherein oil & gas, telecom and realty ended with losses.

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