Happy days for realty sector as Realty Index scales 10-year highs
An unlikely sectoral index, BSE Realty Index, hit 10-year highs recently. Even as experts have been talking about weak offtake in residential properties, the undertone appears to be changing gradually. A host of stocks like Godrej Properties, IB Real Estate, Macrotech Developers and Mahindra Lifespaces scaled new highs in the stock market. Smaller names like Prestige Estates, Sobha and Brigade have also showed traction. What is driving these realty stocks?
Two factors contributed to the surge in residential real estate demand. Home loan rates are at an all-time low and most states have given concessions or waive on registration charges. This spurred a spate of investments in residential properties. In FY21, Godrej Properties sold an average of 20 homes per day, even as it beat Macrotech to become India’s largest real estate company. In the Jun-21 quarter, real estate developers have reported a sharp fall in residential inventory and that is changing the outlook for realty stocks.
The real estate story in India is not just about the crisis of the last few years, but the recovery that is expected in the next few years. Consider some numbers. Macrotech is up over 80% since its listing in April this year. Godrej Properties has doubled since September while Mahindra Lifespaces has tripled in the last 1 year. That is the story with most real estate companies. The moral of the story is that after a very long time, the stock market appears willing to bet on a full-fledged recovery in residential real estate demand. That is the difference!
In the week gone by, Nifty traded with higher volatility as the index corrected during mid-week upto 21860, but it then witnessed a smart recovery to register new record high and the index ended the week just below 22400 with weekly gains of three-fourth of a percent.
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