Real estate stocks are on fire with the realty index jumping more than 5 per cent on Thursday.

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The BSE Realty index is up 5.63 per cent by far the top performer, while Sobha is up 15 per cent, Godrej Properties 8 per cent, Lodha 7 per cent, Brigade 6 per cent, DLF 6 per cent and Oberoi Realty up 5 per cent.

Motilal Oswal Financial Services said in a report after underperforming its listed peers on pre-sales growth over FY21-23, "we believe Sobha is set to outperform in terms of growth given its focus on unlocking its vast land reserve and exploring external growth opportunities through its healthy balance sheet".

"The outperformance is also expected to be driven by improvements in profitability."

"Further, visibility in the monetisation of some of its large land parcels in Bengaluru will lead to a re-rating in its implied land valuation. Sobha is our top idea for CY24 with a revised TP to Rs 1,400, 25 per cent upside potential.

"Key risks to our target price include (a) slowdown in residential absorption, (b) delay in monetization of large land parcels, and (c) inability to sign BD deals," the report said.

Knight Frank India in a report said that despite the Reserve Bank of India (RBI) implementing a cumulative increase of 250 basis points in policy rates between May 2022 and February 2023, and a steady rise in residential prices across major markets, the demand for residential properties in the country continued to grow and reached a ten-year high in terms of annual sales in the year 2023.

Annual sales saw a rise of 5 per cent YoY with sales of 329,097 units recorded in 2023. Mumbai registered the highest sales of 86,871 units demonstrating a 2 per cent YoY growth in 2023. Kolkata witnessed the highest home sales growth (in terms of percentage) at 16 per cent YoY followed by Ahmedabad at 15 per cent, while Pune grew at 13 per cent YoY.

The renewed demand has led to an accelerated pace in residential development, with both half-yearly and annual volume of units launched reaching their highest levels in a decade.

Notably, the launch volumes in 2022 and 2023 have surpassed the sales figures for the corresponding periods. It's worth highlighting that this has occurred only thrice in the past 10 years, the report said.

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