'Real estate stocks attractive for medium term': Edelweiss. Its top 2 picks
1 min read . Updated: 03 Aug 2022, 03:29 PM IST
Premium- Edelweiss believes real estate stocks DLF, Sobha and Macrotech Developers (Lodha) may benefit from a re-rating going ahead
The covid crisis had battered the realty market in H1CY21, but demand has remained strong over the last year. Despite rising interest rates and housing prices, brokerage and research firm Edelweiss believes that momentum in sales will sustain going ahead, especially for organised developers.
“We believe realty stocks are attractive from a medium-term perspective, considering rising consolidation. With investors becoming increasingly confident about the housing sales trajectory, companies with sizeable land banks such as DLF (BUY), Sobha (BUY) and Macrotech Developers (Lodha) (BUY) may benefit from a re-rating going ahead," the note stated. DLF and Sobha remain Edelweiss' top stock picks in the housing space, the brokerage house added.
June 2022 housing demand in India’s top seven cities improved 4% MoM/57% from a year-ago. Launches continued to decline (down 21% from the previous month, but up 3% YoY). In Q2CY22, demand slid 7% QoQ, but supply dipped 18% QoQ. H1CY22 demand/supply shot up 43%/21% year-on-year (YoY).
RERA-driven consolidation is throwing up growth opportunities for organised players, and covid-19 has only accelerated the process. We believe absorption will continue to remain healthy aided by the high levels of affordability despite the increase in mortgage rates/housing prices. However, launches will remain contained due to liquidity constraints, Edelweiss highlighted.
Launches continued to be soft and were down 21% MoM (but up 3% YoY) in June 2022. Overall, launches in Q2CY22 were down 18% sequentially. Supply declined quarter-on-quarter (QoQ) in all cities, with Chennai and Pune the least hit. H1CY22 launches are up 21% YoY, surging the most in the MMR, followed by Bengaluru and Pune.
“Seasonal factors and rising interest rates led to pan-India absorption declining 7% QoQ in the current quarter. Demand fell the most (down 28% QoQ) in Kolkata, followed by the NCR, Chennai and Pune (down 14–16% QoQ each). Bengaluru and Hyderabad witness a 3–5% QoQ fall in demand each. On the flip side, the MMR was the only city that witnessed a 1% QoQ increase in demand in Q2CY22," it added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
