Real estate stocks to buy: Stocks of real estate companies have been among the top performers in the recent bull cycle, but recently yields have tightened. Domestic brokerage and research firm ICICI Securities said the Indian housing market experienced a stellar recovery in FY22, with industry sales volumes recovering to FY20 levels and unsold inventory falling from 46 to 36 months in FY20-22.
The brokerage further said the recent rise in interest rates globally and in India, along with the rise in construction costs, has raised concerns about the sustainability of housing demand and a potential blow to developers’ operating margins. While these concerns are valid, we believe that developers in our publicly traded coverage universe have already anticipated these concerns based on past cycles and are now on a path of calibrated growth while balance sheets remain healthy. That’s why we believe that publicly traded developers can be “shaken, not stirred”.
“Our bullishness is based on publicly traded developers, net debt levels are down 45 percent over FY20-22, annual price increases of 5-6 percent are enough to ease cost pressures, home affordability remains healthy as wage inflation can keep pace with rise in EMIs and market share gains for publicly traded players,” it added.
The brokerage has provided ‘Buy’ ratings for real estate stocks DLF, Macrotech Developers, Oberoi Realty, Brigade Enterprises, Sunteck Realty, Sobha Ltd, Mahindra Lifespace Developers. Meanwhile, it has an add rating for Prestige Estates Projects and a sell position for Godrej Properties shares.
“While the cost of debt will now move northwards over FY23-24E, developers had already foreseen this coming and have focused on reducing absolute debt levels and invested judiciously, asset-lightweight in new lots to reduce the cost of debt. to grow sales volumes over the next 3-4 years,” said the ICICI Securities note.
Despite total industry volumes recovering to FY20 levels in FY22, the brokerage estimates that housing market share in its quoted coverage universe has increased from 16 percent in FY20 to 25 percent in FY22 at a pan-Indian level, and estimates it is will grow to 30 percent in FY24E.
The BSE Realty Index is down nearly 31 percent from its 52-week high of 4,464.31 on Nov. 9, 2021, compared to the Sensex’s 12 percent drop over this period. The Sensex is down 14.6 percent from its 52-week high of 62,245.53 hit on October 19, 2021.
During Thursday’s session, real estate stocks traded in the negative zone, with the S&P BSE Realty Index index falling 51.72 points, or 1.67 percent, at 3052.72 at 1:47 PM IST.
Among the components of the S&P BSE Realty Index index, Phoenix Mills Ltd (-4.54 percent), Indiabulls Real Estate Ltd (-3.69 percent), Godrej Properties Ltd (-2.76 percent), Brigade Enterprises Ltd ( -1.44 percent). ), Prestige Estates Projects Ltd (down 1.41 percent), were the biggest losers. Among the other losers were DLF Ltd (down 1.27 percent) and Oberoi Realty Ltd (down 0.42 percent).
On the other hand, Sobha Ltd (up 4.54 percent), Sunteck Realty Ltd (up 0.84 percent) and Macrotech Developers Ltd (up 0.46 percent).
Disclaimer: The expert opinions and investment tips contained in this News18.com report are their own and not those of the website or its management. Users are advised to contact certified experts before making any investment decisions.
Get all the latest news, breaking news, watch top videos and live TV here.