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Stocks to buy today: On account of multi-year breakout in Nifty realty index, new orders coming in and better earnings outlook for real estate sector, HDFC Securities is highly bullish on the real estate sector for long term. The brokerage believes that the sector may see near-term headwinds, but the long-term story remains intact. It believes that DLF, Oberoi Realty, Phoenix Mills, Brigade and Mahindra Lifespaces shares can be good real estate shares to buy today for long-term.

Highlighting the robust pre-sales momentum in real estate sector; the HDFC Securities report said, "The re-rating of real estate stocks has surprised the street as well as us, with Nifty Realty Index having outperformed the Nifty Mid-cap 50 Index by 63 per cent over the past year. Whilst we were positive on the sector, the extent of outperformance has been beyond our forecasts. The pandemic played a catalyst in accelerating market share gains into the hands of organised real estate players. Banks, equity capital providers, buyers, and supply chains aligned with stronger developers to further solidify this shift."

Quoting reason for being bullish on DLF and Oberoi Realty shares, the brokerage report said, "Buoyed by economic/income recovery/robust stock market wealth creation, the top eight cities in India are seeing a strong growth momentum. We see that demand for larger homes has increased. Buyers are chasing the best developers, while demand for plotted, independent floor, and low-rise development is on the rise. Buyers are flexible on capital values, beyond a certain preset threshold, in case a project is good. They are ready to shell out more. Paying elasticity is higher in luxury segment now and developers like DLF and Oberoi stand to benefit."

As a change from tradition, buoyed by market sentiment, some of the developers have started disclosing presales numbers ahead of results. Further, the brokerage research expects DLF to report presales in excess of 10bn (Brigade – 10bn and Mahindra Lifespaces – 3bn). The presales momentum may continue into the festive season with incremental delta likely to accrue on account of new launches.

"We expect Prestige, Oberoi and GPL to make new records during Q3FY22, if launches remain on track," HDFC Securities report said.

Highlighting upon the Q2FY2021-22 earning trends for the real estate sector; the brokerage said, "We expect the aggregate revenue/EBITDA/PAT for the coverage universe to grow sequentially by 22/31/0 per cent. The impact of commodities’ prices will smoothen over the project completion period as companies will take the hit once projects complete. In our assessment, the non-Mumbai developers need to take about 5-6 per cent price hike to absorb commodity inflation, while higher realisation in Mumbai projects may warrant a 2-3 per cent price hike. Overall, taking price hikes may derail recovery and developers may not go ahead with the same."

On real estate stocks to buy today; the HDFC Securities report said, "While the sector may see near-term headwinds, the long-term story remains intact. We continue to believe that tier1 developers will gain market share, given consumers’ increasing buying preference for reputed developers in under construction projects. We remain positively biased towards the sector. Our top picks are DLF, Oberoi Realty, Phoenix Mills, Brigade and Mahindra Lifespaces."

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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