In an extension of the positive momentum from 2023, real estate shares continued their ascent, marking an impressive 30% gain in the opening week of 2024. The surge was fueled by robust preliminary sales figures reported by major players in the sector, contributing to an optimistic market sentiment.
Within a week, the S&P BSE Real Estate index demonstrated a notable 8% increase, reaching an unprecedented high of 6820.59 points, a level unseen in over 15 years. Leading the charge, Godrej Properties, The Phoenix Mills, Prestige Estates Projects, and Sobha posted substantial gains ranging from 11% to 30% for the current week. Meanwhile, Mahindra Lifespace Developers, Oberoi Realty, and Macrotech Developers contributed with more moderate increases of 6-8%.
Sobha, in particular, reported an impressive 37% year-on-year surge in total sales for the quarter ending December, amounting to Rs 1,952 crore, according to the company’s preliminary update. Cumulatively, the total sales for the nine months concluding in December reached Rs 5,140 crore, compared to Rs 3,734 crore in the preceding year. Notably, the company achieved its highest-ever quarterly sales, reaching 1.25 million sq ft in the mentioned quarter.
Market analysts foresee the upward trajectory in luxury real estate to persist, driven by the increasing purchasing power of the Indian upper middle class. Additionally, there is an expectation of a resurgence in affordable real estate as interest rates start declining from their current levels, coupled with an improvement in rural economic conditions. Jefferies noted that NCR and Bengaluru, with inventory levels below a one-year supply, continue to witness strong demand for new launches.
The brokerage firm projects that between 68% and 85% of its FY24 forecast has already been realized, considering the prevalent trend in pre-sales during Q3.
In the preceding year, the real estate sector emerged as the top-performing industry, with the index soaring by an impressive 74%. Stocks such as Anant Raj, DB Realty, Prestige Estates, Puravankara Ltd, Peninsula Land, and Unitech delivered substantial returns, qualifying as multibaggers in 2023.
Following this robust performance, numerous stocks are currently trading well above their long-term averages. Despite the relatively lower implied forward earnings multiples attributed to strong pre-sales, there is a growing anticipation of a sustained residential cycle in the medium term, influencing current valuations.
Looking ahead, market dynamics suggest a potential continuation of the positive trend, with an optimistic outlook for the real estate sector in 2024. The confluence of factors, including economic growth, evolving consumer preferences, and favorable government policies, is expected to play a pivotal role in shaping the industry’s trajectory in the coming months. Investors are keenly watching for further developments and opportunities in this dynamic and ever-evolving sector.
