A bunch of real estate stocks scaled fresh peaks on Wednesday amid optimism about sustained demand and growth prospects for the sector. Brigade Enterprises and Prestige Estates Projects hit all-time highs while DLF and Macrotech Developers shares scaled 52-week peaks. A majority of stocks in the Nifty Realty index — whose 10 constituents include DLF, Macrotech, Brigade and Prestige — rose one per cent at the strongest level of the day so far.  

DLF, Macrotech Developers hit 52-week highs

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DLF shares gained as much as 0.6 per cent to Rs 506.3 apiece and Macrotech Developers (LODHA) 4.3 per cent to Rs 708.8 apiece on BSE — both 52-week highs — before succumbing to the red zone. 

Prestige Estates Projects, Brigade Enterprises hit all-time highs

Brigade Enterprises (BRIGADE) and Prestige Estates Projects shares climbed up 1.5 per cent and 4.8 per cent to all-time highs of Rs 587 apiece and Rs 602.3 apiece on the bourse. The recent peaks mirror the overall gain in the sector over the past few months. 

Stock/index Return (%)
1M YTD 1Y
Nifty Realty 10 19.2 32.9
Nifty50 1.9 3 19.1
PRESTIGE 16.5 26.3 45
GODREJPROP 8.4 21.7 21.4
SOBHA 2.2 -3.5 9.1
MAHLIFE 17.1 29.2 14.4
OBEROIRLTY 0 13.1 24.9
DLF 7.8 32.8 60.9
BRIGADE 7.4 24.4 27.9
IBREALEST 14.4 -22.6 -4.9
PHOENIXLTD 4.8 8.7 38.3
LODHA 29 17.8 18.3

What's driving gains in real estate stocks?

Many analysts believe real estate stocks are poised for a sustained rally owing to an expected multi-year upcycle in the sector and a pause in benchmark interest rates.    

The real estate sector as a whole is poised for growth, said AK Prabhakar, Head of Research at IDBI Capital Markets. IDBI Capital has a 'buy' rating on DLF with a target price of Rs 530, which implies a potential upside of eight per cent from the previous close.

Prabhakar also likes Brigade, Prestige, Godrej Properties, Oberoi Realty and Kolte Patil from the space.

"Currently, there is a sense of urgency as a lot of pent-up demand post-COVID-19 is driving housing sales. Buyers are eager to own homes because they see that rising property rates and the possibility of higher home loan interest rates may affect future affordability. Whether the current level of demand will last or reduce depends on how prices, purchasing power and borrowing costs move," Anuj Puri, Chairman of property consultant ANAROCK Group, told Zeebiz.com. 

The Indian housing market is currently fuelled by organic and end-user-driven demand, which is far less labile than speculative demand as it is based on the desire of potential buyers to own a home, Puri added. "Such demand will prevail despite most headwinds, though actual market activity can be suppressed by reduced affordability."

Most real estate companies reported strong performances in the quarter ended March 2023 driven by strong demand reflected in pre-sales growth, with DLF clocking a three-fold increase in sales. According to Zee Business research, DLF and Brigade Enterprises staged a positive surprise whereas Sobha, Godrej Properties, Mahindra Lifespace and Prestige Estates exceeded analysts' estimates. Oberoi Realty, on the other hand, fell short of estimates. 

"The realty market has been doing well over the last few quarters... The home segment continues to double as a part-time workplace. Housing prices have increased again, making residential real estate the top-performing asset class for over two years attracting investors who are looking at rental yields and capital appreciation," Deepak Jasani, Head of Retail Research at HDFC Securities, told Zeebiz.com. 

"There are chances that the RBI will now bring down the repo rate in the coming few months, which could further aid steady growth momentum in residential sales especially in the affordable, low- and mid-income housing segments," he added. 

Time to be selective in realty shares?

Real estate valuations appear to be at a premium compared to their long-term averages, Vinod Nair, Head of Research at Geojit Financial Services, told Zeebiz.com. 

Nair recommends a stock-to-stock approach within the space.

EDITOR'S TAKE | Anil Singhvi has a long-term 'buy' on DLF shares

DLF is among Zee Business Managing Editor Anil Singhvi's long-term 'buy' recommendations, with a target price of Rs 800 — implying an upside of 58 per cent from the latest peak. Read more

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