Stocks in The Indian Real Estate Industry Performing Great on The Strength of Robust Property Sales

2023 April second week's unexpected pause in interest rate hikes by the Reserve Bank of India (RBI) and record fourth-quarter pre-sales readings by real estate developers have reignited investor appetite for property stocks.

Analysts anticipate the sector will stage a catch-up rally after falling to multi-month lows.

On Monday 11th April 2023, real estate stocks advanced for the sixth consecutive day, adding to last week's gains, as the RBI's decision to maintain the status quo provides respite from rising interest rates for homebuyers.

11th April 2023 marked the second consecutive session in which the BSE Realty Index was the best performer among all sector indices, gaining more than 4% to finish at 3,369.53. The index has increased by 13% since March's end, when it reached a nine-month low of 2,969.83.

In 2022, real estate equities have underperformed the benchmark indices by a significant margin, and the catch-up rally appears to be continuing.

While the RBI's suspension augur well for the entire sector, the debt-to-equity ratio of the majority of listed real estate companies has improved over the past few years, which may contribute to a structural uptrend for the sector, particularly among the organised participants.

The Nifty returned 4.3% in calendar year 2022, whereas the Sensex gained 5.8%. In contrast, the Real Estate index decreased 10 to 12 percent.

Godrej Properties, based in Mumbai, increased by more than 9 percent on a single trading day for the first time since November 2021, after announcing its best-ever quarterly revenue. On Monday, domestic brokerage firm Motilal Oswal upgraded the stock to "buy" and set a price target of 1,575, indicating a 28% upside from Monday's closing price of 1,227.25. To account for recent project additions, the brokerage increased FY24 and FY25 pre-sales estimates by 23% and 44%, respectively, and believes the company is on pace to meet its FY26 pre-sales goal of 20,000 crore.

Godrej Properties ranked second among all BSE 500 companies in terms of performance. More than 45 lakh shares were traded on the BSE and NSE, which is more than nine times the average daily volume for the last month. The stock's closing price on the BSE was 1,227.25 per share, a 22% increase over the previous five trading sessions.

On 11th April 2023, every component of the Real Estate index closed in the green, with DLF (+5.6%) and Prestige Estate (+6.7%) among the top 10 gainers in the BSE 500.

Experts believe that with the housing cycle turning and launches strengthening, Mumbai real estate sales will continue to be robust; this will benefit Macrotech Developers (Lodha), Oberoi Realty, Godrej Properties, and Sunteck Realty's respective stock prices.