With the effect of COVID 19 decreasing, as the economy is accelerating and people’s income is increasing, the demand for homes is increasing. Developers are also offering various discounts to raise the demand.
In the real estate sector, the demand has started coming once again after recovering from the COVID 19 pandemic. With the effect of COVID 19 decreasing, as the economy is accelerating and people’s income is increasing, the demand for homes is increasing. Developers are also offering various discounts to raise the demand. At the same time, due to the shift of focus to the organized sector after COVID 19, the overall sector is also benefiting. Experts believe that interest rates are at their lowest levels, macro conditions are improving and there is strong growth in the economy. The sector will get the benefit of this. Some stocks related to the sector may outperform in the coming days. In the last one year, the realty index on Nifty has outperformed the benchmark.
Rental collection strong
According to brokerage house ICICI Securities, rental collections in Indian REITs are strong. During 9MFY22 it has been 90 per cent of FY21. While the surge in Omicron cases has temporarily delayed office leasing recovery, we expect this trend to reverse from Q1FY23E (after April 22) with better pace of vaccination across India. Selected corporates will call the employees back to the offices and international travel will also accelerate.
The consensus on the Broader scale is that now 15 to 20 percent of the employees can work from office permanently. Whereas 10 to 15 percent of the employees can work from home permanently. While the remaining 60 to 70 percent of the employees can work under the hybrid model. This will benefit the listed REITs. However, if there is an increase in the global interest rate, then it will remain a risk factor. The brokerage has advisory investment in Embassy Office Parks REIT. HOLD at Mindspace Business Parks REIT and ADD at Brookfield India REIT and DLF.
Upcycle Trend in Real Estate
Brokerage house HDFC Securities says that there is an upcycle in the real estate sector. The sector is witnessing an upcycle trend due to rising income levels after the COVID 19 pandemic, narrowing of the rental yield and interest rate corridor gap and gaining market share by organized players. At the same time, the way there is a strong economic growth in the country, the real estate sector has once again come in demand. This tailwind is in favor of real estate revival and is showing decent growth in sales. The trend of investing a large part of household savings in the purchase of houses is being seen. The collapse of the Tier-2 developer ecosystem is transforming the supply chain. In which competitors are now becoming partners and land bank suppliers.
Reason for increasing demand
According to the report, the real estate sector has been hit hard due to COVID-19. However, now the housing demand has improved. Lower interest rates, reduction in stamp duty, discounts offered by developers and high attrition are also supporting the demand. Further inflation is a risk factor as it can push the input rate higher. Developers, however, have headroom to absorb inflation as over time, more transparency has reduced capital cast and organized developers are benefiting from 25-30 per cent lower funding cost than tier-II players.
Top Picks: DLF, Oberoi, Phoenix Mills, Mahindra Lifespaces, and Brigade Enterprises
target for share
DLF: Rs 486
Oberoi Realty: Rs 1143
Mahindra Lifespaces: Rs 473
Brigade Enterprises: Rs 619
Phoenix Mills: Rs 1364
Prestige: Rs 633
Sobha: Rs 1000
Kolte-Patil Developers: Rs 381
Godrej Prop.: 1804
(Disclaimer: Stock investment advice is given by the brokerage house. These are not the personal views of The Financial Express. Markets are risky, so take expert opinion before investing.)
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