Top real estate stocks to buy: Nifty Realty index soars 17% so far in July, nears 52-week high

According to data sourced by Knight Frank since the beginning of this year new launches have shot up by 71% on-year and sales have spiked 67%. (Image: REUTERS)

Nifty Realty index has outperformed the benchmark Nifty 50 index during the month of July, surging 17% so far. The real estate index was up 2.51% on Thursday, inching closer to a fresh 52-week high, helped by a sharp up-move in stocks such as India Bulls Real Estate, Phoenix, Prestige, and DLF. Real estate stocks have been gaining momentum as the sector emerges out of a multi-year consolidation. “The Real Estate sector has gone through a supply and demand side consolidation phase over the last few years, which is now starting to benefit the large developers,” Ujjawal Kumar, Analyst, Green Portfolio told Financial Express Online. 

Real Estate stock performance in July

*Indiabulls Real Estate – up 40.20%, at Rs 165 apiece
*Phoenix Mills – up 7%, at Rs 870 per share
*Brigade Enterprises – up 15%, at Rs 320 apiece
*DLF – up 18.2%, at Rs 332.45 per share
*Godrej Properties – up 12%, at Rs 1,566 apiece
*Oberoi Realty – up 13%, at Rs 689 per share
*Sobha Ltd – up 28%, at Rs 602 apeice
*Sunteck Realty – up 27%, at Rs 371.85 per share

What’s changing for real estate sector?

“Economy slowly opening up is ensuring the return of the retail customers to residential purchases that was in a state of a lull. Also, WFH is fuelling home upgrades in urban markets which is prompting mid-segment home buying,” said Suresh Rangarajan – CEO & Founder of Colive. “The continued lower interest rates on mortgages is another factor. With all these positive signs there are strong real demand factors that are driving up the stocks,” he added.

The multi-year consolidation and now the cyclical recovery in the Real Estate space has not gone unnoticed. Jefferies’ Global Equity Strategist, has also voiced his optimism on India’s real estate stocks going forward. Chris Wood, earlier this year said that the scale and duration of the previous downturn in real estate is why he expects the new housing cycle to last at least five years once it gets going.

According to data sourced by Knight Frank since the beginning of this year, new launches have shot up by 71% on-year and sales have spiked 67%. Further, the conducive environment created by changes in policy is building consumer confidence in owning the asset, Vijay Agrawal- Executive Director, Equirus Capital told Financial Express Online. “The decline in repo rate, stamp duty and ready reckoner rates have been key factors improving the consumer sentiment for purchasing new properties” he added.

Has the Nifty Realty index run up too much?

Although Nifty realty has gone up analysts do not believe the rally is over yet. “The market will see more uptick in Real Estate stocks due to higher velocity in sales. This will improve results of Real Estate Companies. Hence market has still headroom for upward price correction,” said Vijay Agrawal. 

He added that stocks such as DLF, Godrej Properties, Embassy, Oberoi Properties, Brigade, Purvankara, Sobha, Prestige, and Indiabulls Real Estate would be excellent to have in the portfolio from the Real Estate sector. On the other hand, Ujjawal Kumar is looking to bet on companies that are very prudent in capital allocation (low on debt) and treat land as a raw material. “To that extent companies like Ashiana Housing, Eldeco Housing are some of our bets on the small and midcap side. On the large-cap side we believe Oberoi Realty and Godrej Properties look interesting,” he added.

(The stock recommendations in this story are by the respective research and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)