Shares of real estate developers rose as brokerages said residential housing was poised for a bull cycle and the commercial segment was on track to rebound from pandemic-induced disruptions.
Motilal Oswal launched coverage on four developers – Macrotech Developers Ltd. and Oberoi Realty Ltd. with a “purchase”, while DLF Ltd. and Godrej Properties Ltd. with a “neutral”. A decade-long regime of low interest rates, flat prices over the past seven years and rising incomes are the brokerage’s main triggers for residential affordability.
Companies exposed to the Bengaluru and Pune markets, he said in a note, will outperform their peers in volume and value. Mumbai-based developers will benefit from long-term pent-up demand.
This is corroborated by a report by Knight Frank which showed property registrations in Mumbai, India’s most expensive property market, hit their highest level in at least nine years in 2021. This reflects the market rebound housing industry that was struggling with a prolonged downturn even before the pandemic.
Motilal Oswal also said that the ongoing consolidation in the real estate sector – after demonetization, the goods and services tax and the Real Estate (Regulation and Development) Act – would help listed companies to double their sale rates in the over the next three to four years. Supply and pricing disciplines and liberal land acquisition policies are further catalysts.
According to a January 12 report by ICICI Securities, improving the pace of vaccinations and reopening workplaces would lead to an increase in office net absorption over the next three years. “Competitive rentals, in the IT/ITeS markets of South India and NCR/Pune and a gradual increase in hiring could trigger a resumption of office absorption,” the brokerage said in a statement. note, calling 2022 a “year of resumption of office leases”. ”.
ICICI Securities recommended a “buy” on Embassy Office Parks REIT and Phoenix Mills, while it has an “added” call on DLF, Brookfield India REIT, Mindspace Business Parks REIT and Brigade Enterprises. The brokerage suggests “holding” on Oberoi Realty and “reducing” on Prestige Estates projects.
Shares of Macrotech Developers, Oberoi Realty and Godrej Properties gained more than 2%, while DLF rose 1.5% intraday on Tuesday. The shares, however, pared some of the gains to trade between 0.3% and 1.6% at 1:10 p.m. Tuesday. The Nifty 50 benchmark is flat.