Will realty stocks will continue to perform? Expert insights

Real Estate stocks have been performing steadily in the markets over last few days. One of the key reasons have been the consistent sales and growth of a slew of realtors. What has led to this consistent performance and will the rally continue? Republic spoke with experts to understand the underlying causes. Highlights:

Shobhit Agawwal, MD & CEO, Anarock Capital 

The main reason realty stocks have been peforming well is that listed real estate developers reported the best-ever sales in FY23 and are optimistic about the future. Additionally, the RBI kept the repo rate unchanged at 6.5% in Apr monetary policy as against the street expectation of a 25 bps hike. Repo rates have a direct impact on home loan rates. Inflation is cooling off which may result in a change in policy stance during the MPC meeting on June 8. As a result, the overall stock market is bullish. Housing sales across the top seven cities of India grew 36% in FY23, reaching 3.8 lakh units. Despite interest rate hikes, many listed developers have been able to manage their cost of debt below 10%. The developers are focused on execution and with many projects being completed, homebuyer confidence is high and finally, luxury housing has been performing well with HNIs and ultra-HNIs are trying to close deals before a likely price hike.

Vimal Nadar, Head of Research at Colliers India

The Indian real estate market continued to remain resilient in 2023, so far. With continued interest from institutional investors, investment inflows into Indian realty rose 37% YoY in the first quarter of 2023. While occupiers remained watchful of the economic headwinds, office market saw 10.1 mn sq ft of gross absorption during the first quarter, keeping vacancy levels rangebound. Moreover, during Q1 2023, the industrial and warehousing demand was the highest in 8 quarters at 7.2 mn sq ft, up 11% YoY. Amidst concerns of elevated construction costs and housing interest rates, the residential market continued its strong streak. This resonates with positive consumer interest, an upbeat market and strong performance of realty stocks. 

Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE

We have witnessed a good recovery for most real estate companies in FY 22-23. The recovery can be attributed across the asset class, including residential, office, retail, industrial and logistics, and was not limited to one specific category. Following this growth trail, the momentum in 2023 is expected to continue. Moreover, India will be comparatively a bright spot among all major economies globally and would attract investments in real estate. The fact that 2022 was a landmark year in terms of real estate activity indicates the long-term bets investors are willing to take on the real estate sector in India. 

Will the rally last?

An overall positive market sentiment combined with the introduction of the Real Estate Regulatory Authority (RERA), affordable housing schemes, infrastructure development, increased demand and an investment push in Indian real estate are some of the primary reasons for the positive sentiment witnessed in the market for real estate stocks basically showing a boost in investor sentiment. While a few realty companies continue to drive the performance of realty stocks, this also indicates that this is likely to impact the sector at large.