One should, however, exercise caution as Q4 earnings could have some negative surprises in store
Mumbai: Investorsarenowupbeat on housing finance and real estate companies, thanks to the budgetary measures i nt e nded t o g ive housing a boost. But one should be cautious as the earnings of the next quarter could well be the real measure for sustainable exuberance in the sector, say experts.
Investors can expect 15-40% returns on investments in shares such as Satin Creditcare, HDFC, DHFL, Godrej Properties, Sobha Developers and DLF over a year’s time, say brokers.
“Some re-rating in stock valuations can be justified due to the budget proposals,” said Ajay Bodke, CEO and chief portfolio manager of Prabhudas Lilladher.
“Investor money is coming in. Sustainability of higher prices is dependent on strong earnings growth for those companies in the medium term… Any faltering in earnings growth will jeopardise these level of high valuations,” he added.
The Union Budget for 2017-18 has given infrastructure status to the affordable housing segment, a move that will help housing finance companies raise funds at cheaper rates. It has also proposed to increase allocation for the Pradhaan Mantri Awas Yojna (PMAY), which would pave the way for construction of more houses. Time for completion of projects too has been extended to five years from three years.
“With relatively lower debt on their balance sheets, some real estate companies are drawing investor attention now,” said Sandeep Nayak, CEO, Centrum Broking.
Demand for affordable housing finance is likely to increase following higher allocation for PMAY, ICRA said in a report. This augurs well for builders and lenders. “Budget has given relief for both housing finance and real estate companies,” said Sanjiv Bhasin, executive VP, market & corporate affairs, IIFL.