Oberoi Realty, Godrej Properties, DLF: Analysts super bullish on real estate stocks, say these counters can give up to 3x returns in 3-5 years

Most real estate stocks have given decent returns over the past 12 months, and going by the analysts' views, they will continue to do well and reward investors handsomely in the long run, given multiple positive factors at play.

The S&P BSE Realty index has gained around 17 per cent in the last one year, while the S&P BSE Sensex has rallied nearly 9 per cent during the window.

Among individual names, Phoenix Mills has been the biggest gainer on the BSE Realty index, with a gain of 35.1 per cent, followed by Macrotech Developers (up 26.5 per cent), DLF (up 25.4 per cent), and Prestige Estate Projects (up 21.4 per cent), Trendlyne data show. Out of 10 constituents of the index, eight have given positive returns, while two scrips—Indiabulls Real Estate (IBREALEST) (down 7.7 per cent), and Sobha (down over 18 per cent)—have been negative. 

Sudip Bandyopadhyay, Group Chairman, Inditrade Capital, says his view on the real estate sector for the long term remains positive. Growing income in the hands of the country's middle class, the way the GDP is growing, and urbanisation make the overall real estate sector lucrative, the market expert said.

"In the short term, there could be some challenges here and there, but by and large, we maintain our positive stance on real estate for the long term," Bandyopadhyay said in an interaction with Zeebiz.com.

The metros and the mini-metros will continue to attract a lot of investment as people are upgrading; they are moving from the outskirts of the city to the main areas of the city, and this trend will continue. Besides, new smart cities are getting developed. So, all these augur well for the real estate sector, the expert said further.

Under these circumstances, organised real estate players who have cleaned their balance sheets and have moved out of unrelated diversification should continue to do well. Names such as Oberoi Realty, Godrej Properties, and Sobha are good buys for the medium to long term, Bandyopadhyay said.

AK Prabhakar, Head of Research at IDBI Capital, said that since 2008, the real estate sector has been underperforming. There have been pockets of rallies, but never a stellar rally—the kind of bull run that other indexes have witnessed.

However, the outlook looks promising now with the reforms, such as RERA and the implementation of GST, that have made the purchase and sale of properties and the overall proceedings a lot more formal.

RERA stands for Real Estate Regulatory Authority. It aims to protect home purchasers and boost real estate investments. The bill of this Act was passed in Parliament on March 10, 2016, by the Upper House (Rajya Sabha), and it came into effect on and from May 1, 2016.
 
"The sector is getting formalised, and shareholders will benefit from it over a period of time. There have been talks of the Indian economy becoming 6 trillion dollars or 10 trillion dollars in the next 5–10 years, and whenever the economy has done well, the real estate sector has given the best returns.

Another important factor that should be kept in mind is that in many places, even the builders are becoming formalised. So, more listed players are coming into the space. In Mumbai, the redevelopment projects are now being given only to listed, formal players—companies that enjoy good reputations and names.

This, again, is positive for the listed real estate developers, analysts say.

"We are looking at a 3-5 year time period where many real estate stocks will give 2-3x returns. I am very positive on the sector," Prabhakar added.

His top picks from the sector include Oberoi Realty, Godrej Properties, Brigade Enterprises, Phoenix Mills, Ganesh Housing, Kolte Patil, and DLF.

Q1 results 

DLF

DLF reported a consolidated net profit of Rs 527 crore for the quarter ended June 2023, marking an increase of 12.2 per cent compared with the corresponding period a year ago. The property developer's net profit exceeded analysts' estimates by a wide margin. Its revenue came in at Rs 1,423.2 crore for the June quarter, as against Rs 1,441.6 crore for the year-ago period, according to a regulatory filing.  According to Zee Business research, DLF's quarterly net profit was estimated at Rs 512.2 crore and revenue at Rs 1,704 crore. READ MORE

Godrej Properties

Godrej Properties reported a nearly three-fold jump in consolidated net profit at Rs 124.94 crore for the first quarter of this fiscal, while sale bookings fell 11 per cent annually in the April-June period to Rs 2,254 crore. Its net profit stood at Rs 45.55 crore in the year-ago period. Total income rose to Rs 1,265.98 crore in April-June 2023–24 from Rs 426.40 crore in the corresponding period of the previous year, according to a regulatory filing. READ MORE