Nuvama Institutional Equities suggests that real estate stocks present an attractive investment opportunity. They note a 28% year-on-year improvement in housing demand across India’s top 7 cities in April 2024, with a 17% increase in demand so far in 2024. However, new launches have decreased by 10% year-on-year, and supply has dipped by 15% year-on-year.
The unsold inventory has also decreased by 7% year-on-year, with inventory months falling from 19 to 15 in April compared to the same month last year. This reduction in unsold inventory has led to an increase in prices across all major cities.
With the Reserve Bank of India pausing rate hikes and real estate developers focusing on business development, Nuvama expects sales momentum to improve, especially for organized developers. They anticipate a consolidation favoring organized developers in the medium to long term.
Post-COVID, organized developers are seeing improved cash flow generation, which will help them gain market share. Those with strong balance sheets will benefit from attractive business development opportunities.
Recommendations and Top Picks
Due to liquidity constraints, Nuvama expects launches to remain limited. They believe real estate stocks are attractive for medium-term investment, particularly due to rising consolidation. They suggest that investors consider developers with sizable land banks for potential re-rating.
Nuvama’s top picks in the sector are DLF, Prestige Estates Projects, and Brigade Enterprises, all of which they rate as ‘Buy’.
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