Residential sales continued to grow strong in the October-December quarter across India, with the help of low mortgage rates, stable residential prices, and continued Work-from-Home trend among various other factors, said analysts at ICICI Securities. This continued demand has led to market share gains for listed real estate sector players who are emerging from a decade of underperformance now, while smaller unlisted players lose ground. “We estimate the pan-Indian residential market share for our coverage universe to grow from 25% in last fiscal year to 31% in the financial year ending March 2024,” the brokerage firm said.
Strong sales continue
ICICI Securities noted that the real estate sector carried on with strong sales in the third quarter of the current fiscal year. Developers had launched new projects earlier in 2021 to benefit from low-interest rates, stable residential prices, and strong hiring/wage growth in the IT/ITeS sector. This had led to a sharp rise in sales volumes and the same momentum was seen to be carried forward. “As per our channel checks, this momentum has carried forward into Q3FY22 (festivals of Dusshera and Diwali), and we expect developers to post record sales booking numbers in H2FY22 led by new launches, ICICI Securities said.
Stocks to buy
Sunteck Realty – Buy
The stock trades at Rs 496 per share, up 65% in the last six months. ICICI Securities noted that Sunteck Realty clocked healthy sales bookings of Rs 2.7 billion in the second quarter of the financial year, an increase of 36% on-year basis, along with quarterly collections of Rs 2.1 billion. In the October-December period the company is estimated to have clocked sales bookings of Rs 2.7 billion, flat from the previous quarter, maintaining the stellar growth in sales. “Release of higher floor inventory at Avenue 1 and 2 completed towers in ODC, Goregaon may further boost sales in Q4FY22,” the report added.
Mahindra Lifespace Developers – Buy
Mahindra Lifespace launched new towers at its Alcove, Chandivali, and Vicino, Andheri projects in Mumbai during the October-December quarter, with further 3-4 projects planned to be launched in the January-March quarter. “We expect the company to clock third-quarter residential bookings of Rs 2.8 billion and gross sales bookings of Rs 12.3 billion in this fiscal year against Rs 7 billion in the previous financial year with Jan-March likely to see sales bookings of Rs4-5 billion driven by new launches,” ICICI Securities said. The stock trades at Rs 260 per share, up 31% in the last six months.
- ‘Add’ call on other leading developers such as DLF, Macrotech Developers, and Brigade Enterprises
- ‘Hold’ rating on Oberoi Realty and Sobha Limited
- ‘Sell’ rating on Godrej Properties
- ‘Reduce’ rating on Prestige Estates Projects