The BSE Realty index has rallied 30% from the day the Union budget was presented till end-May.
But is this justified, given that there has been hardly any change in sentiment on the ground?
The trigger came after the central budget measures on real estate investment trusts. Stocks jumped on the hope that realty companies can now raise funds to alleviate the debt burden that they are reeling under.
Further, higher salaries as the Seventh Pay Commission comes into effect are expected to push demand for housing in the near term. Lower interest rates on housing loans should also help.
But then, the March quarter results painted a gloomy picture of sticky sales of residential units.
Markets such as the National Capital Region, Kolkata and some pockets in Mumbai hold a huge inventory of unsold projects.
Vacancy levels remain high with not much respite in spite of new projects being deferred in most metros.
Firms such as DLF Ltd with high exposure to such regions mirrored this trend.
As in the earlier quarters, smaller regional developers such as Sobha Developers Ltd and Godrej Properties Ltd have lesser woes as the cost overruns due to a higher inventory are not so much an issue as with larger players. Therefore, they are able to hold profitability.
Yet, even Sobha posted only marginally higher sales in fiscal 2016, compared with 2015. In fact, the company missed its annual guidance for the third consecutive year in 2016. It was the commercial leasing activity that sprung a positive surprise with sustained demand.
Three months ago, a report by Elara Capital said that the information technology and related segments were the highest takers of business space.
But then, this accounts for a relatively small share in the total revenue raked in by realty firms.
Unless residential markets show traction, the sector holds little charm for a retail equity investor.