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Realty Stocks Rise As Analysts See Growth Revival

Indian real estate stocks gained as analysts see strong growth revival due to low systemic inventory, launch of new projects amid rise in rental yields and price hikes.

All the Nifty Realty constituents advanced, led by Indiabulls Real Estate Ltd.’s 7.5% gains, followed by The Phoenix Mills Ltd.’s 5.2% jump, and Sobha Ltd.’s rise of 2.5% as of 12:20 p.m. on Wednesday.

According to JM Financials, the booking value across developers is likely to rise 10% to 30% year-on-year for the fiscal 2022-23 with the exception of Mahindra Lifespace Developers Ltd. “Strong sales momentum in the first quarter augured well for the sector,” the brokerage said in a research note, which termed the June quarter performance of real estate companies as ‘strong’ in a relatively weak quarter seasonally.”

The rise in interest rates or home loan rates, according to the brokerage, is the key monitorable. But that has been negated by the momentum of fixed home rate schemes floated by developers, low systemic inventory, a rise in rental yields and price hikes, the note said.

“With robust supply, developers with large land banks and aggressive launches would benefit,” JM Financial said, as it remains positive on the listed real estate space.

The brokerage has identified DLF Ltd., Macrotech Developers Ltd., Prestige Estates Projects Ltd., Oberoi Realty Ltd. and Phoenix Mills as its preferred stocks. The note said that optimism in residential space, a sharp recovery in retail and a revival in the commercial segment bode well for the sector.

Similarly, Motilal Oswal also reiterated a ‘buy’ rating on Oberoi Realty and estimated a 16% return over the next 12 months, as it identified multiple re-rating triggers for the company, including the launch of the Thane project, new project additions in Mumbai MMR, and entry into new markets like NCR.

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