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The Nifty realty index is down 31% from November 2021 peak, bringing the sector valuations (PBx) to within 10% of their past 10-yr average valuations. Given sector consolidation, better corporate balance sheets and a rising cycle, global brokerage Jefferies believes realty stocks should trade higher despite rising interest rates.

Godrej Properties (GPL), DLF and Macrotech Developers (Lodha) are its top stock picks in the real estate space. "The developers have continued to push through on new launches as ~10-year low inventory drive price hikes. Within our coverage, GPL, Lodha, DLF and Prestige should have relatively better pre-sales performance," the note stated.

Developers have continued to push forth with new launches and Jefferies believes Godrej Properties should have a much more stable year given good launches early in FY23.

"Our analysis of data from Propequity for months of Apr-May 2022 shows that primary resi sales in Top-7 cities were maintaining the sales momentum near the seasonally strong Jan-March 2022 quarter level," it said.

Data from property consultants, new launches and registration data suggests housing momentum is strong into June, holding up the positive trend through the quarter. The sales jump comes amidst a rise in mortgage rates of ~75 bps during 1Q.

Property registrations data for MTD (month-to-date) June 222 from Delhi and Mumbai is 50% higher than the June 2019 (pre-COVID) levels indicating overall activity levels continue to stay high in the property markets. Inventory in several cities viz. Gurgaon, Bangalore, Pune is below the 20-mth levels and consistent with the currently observed price momentum in these markets. Data also shows that the trend of larger house sizes and premium locations selling faster is also still intact.

Based on new launches and data analysis from Propequity; the brokerage expects a strong 1QFY23 pre-sales performance from the listed majors, which should help the developers put on track to meet FY23 guidances.

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

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