Analysts advised investors to think about accumulating the shares of residential real estate developers in the middle of the weakness because there is the possibility of ups and downs in the sector.
According to Analyst Consensus estimates compiled by Bloomberg Macrotech Developers, Oberoi Realty, DLF, Brigade Enterprises and Sunteck Realty could gain lumpsum by 20-27%.
Biplab Debbarma, Analyst, Antique Stock Broking commented “Outlook for Real estate Companies remains optimistic as the majority of the Companies give strong growth guidance.”
“Developers like DLF, Lodha, Brigade, and Century Textiles with enough inventory or Monetizable land parcels in key micro markets to keep the launch pipeline intact for the next 2-3 years would have a significant advantage over others.” DLF, Lodha, Brigade and Century Textiles are now Antique’s top picks in the Real State Sector.
Below mentioned real estate stocks have been among the top performers in the market rally between March 2020 and October 2021. However, these Stocks also have declined in the middle of the Broad-Based sell-off.
In 2022 the NSE real estate index has dropped 18% as against the nifty’s slide 5.4% slide.
Mahindra Lifespace climbed 72.5%. Godrej Properties declined 29%, DLF has fallen 18.4% and Macrotech has shed 15.2%.
In Mumbai, property resignation increased by nearly 73% year on year to 9630 in May.
Analysts stated that the real estate sector is witnessing a pick-up in sales on account of weak prices in the past few years. Also witnessing lower interest rates and extended outperformance in the stock market.
Improving and the growing cash flow on the company has led to the healthier balance sheets with companies in the sector seeing an aggregate net debt reduction of Rs. 3100 crore in FY22.
The Debt Ratios of the top companies are mentioned below.
DLF, Prestige Estates, and Lodha noticed the maximum growth in the collection at 136%, 90% and 51% year-on-year, respectively. Century Textiles also saw growth of 208% in FY 22 though the increase was on the lower base of ₹620 crores in FY21.
“Growing forward, the outlook remains positive as low-interest rates and increasing aspirations would aid growth for residential space,” said Ajit Mishra, VP- research, Religare Broking.
“Likewise, the reopening of the economy and the ongoing economic recovery would benefit the commercial real estate space.”
Prestige Estates reported a strong March Quarterbacked by new launches as booking values came in at Rs. 3,268 crore, up 77% from the same period a year ago.
Sobha noted its highest-ever quarterly cash inflow of Rs. 1,291 crore in the March quarter, up 32% year-on-year. The management was able to reduce net debt by Rs. 317 crores.
“The real estate sector is witnessing a higher number of new launches that may create an oversupply situation in next the 2-3 years, but till then, the sector looks to be in a sweet spot.”
Arun Malhotra, portfolio manager at CapGrow Capital Advisors commented that the rally in real estate stocks may continue for 2-3 years.