Shares of real estate companies are having their best times on Dalal Street, with as many as eight stocks that are part of the BSE Realty index giving multibagger returns in the current financial year.

In fact, it tops the list of sectors that have given best returns in the ongoing financial year.

The unprecedented demand across key metropolitan cities and beyond is the primary trigger for the rally in shares.

In the first nine months of 2023, housing sales in the top seven cities had reached Rs 3.5 lakh crore in value terms, registering a 7% increase from the entire sales value in 2022, according to a report by property consulting firm ANAROCK.

Real estate developers sold approximately 3.49 lakh units in the top seven cities, including Mumbai, NCR, Bengaluru, Hyderabad, Pune, Chennai, and Kolkata, with Mumbai leading in the number of units sold.

“The fact that the housing sales value in nine months of 2023 exceeded that of the whole of 2022 reflects the increased demand for premium luxury homes this year,” said Anuj Puri, chairman of ANAROCK Group.

Analysts are bullish on the upward momentum in the residential market sustaining in the near-to-medium term.

“With the RBI pausing the rate hikes and developers ramping up business development, we believe the sales momentum would improve, particularly for organised developers,” said Nuvama Institutional Equities.

Riding on the bullish momentum in the sector, both foreign institutional investors and mutual funds have steadily increased their holdings in stocks.

FIIs have increased their stakes in Godrej Properties, Macrotech Developers, and Phoenix Mills for three consecutive quarters.

Similarly, mutual funds raised their holdings in DLF, Mahindra Lifespace Developers, Oberoi Realty, and Sobha Ltd for three consecutive quarters.

In fact, retail investors (upto Rs 2 lakh) also raised their bets in the sector, increasing their holdings in Prestige Estate Projects, Brigade Enterprises, and Mahindra Lifespace Developers for three successive quarters.

Stock Talk

After a strong run, several stocks in the sector are trading well above their long-term averages. Therefore, it’s not a “buy” across the board.

However, analysts remain constructive on the sector given the growth prospects, with HDFC Institutional Equities retaining its “buy” rating on Oberoi Realty in the backdrop of expected robust cash flows from the newly developed properties in Mumbai.

In view of the robust growth visibility and expected appreciation in land prices, the brokerage firm is positive on Macrotech Developers, but has an “add” rating due to limited upside potential in the stock.

For Nuvama, DLF, Prestige Estate Projects, and Brigade Enterprises are the top picks with a “buy” rating for each of them.

(Data inputs from Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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