BSE Realty index at 11-yr high over revival hopes
Spurt in sales, improved outlook buoy shares of most realtors
The BSE Realty index, a gauge for the performance of real estate stocks, hit an 11-year high on Wednesday. The gauge posted its biggest single-day gain in over four years as the rise in property registrations and lower home loan rates triggered hopes of a demand revival in the sector.
The BSE Realty index, a gauge for the performance of real estate stocks, hit an 11-year high on Wednesday. The gauge posted its biggest single-day gain in over four years as the spurt in property registrations and lower home loan rates triggered hopes of a demand revival in the sector.
Adding to Tuesday’s 3.5 per cent gain, the 10-share index rose 8.4 per cent to end at 3,621, a level last seen in November 2010. The 8.4 per cent jump was the most since April 17, 2017, when the index had risen 8.9 per cent.
Shares of Godrej Properties zoomed 13 per cent, DLF rose 11.6 per cent, and Indiabulls Real Estate surged 8.9 per cent amid acrossthe-board buying in realty shares.
Real estate developers, analysts, and consultants said lower interest rates on home loans should boost sales of residential properties in the upcoming festive season, which accounts for a major portion of yearly sales.
Investors were enthused by early signs of demand pick-up. In a note, Motilal Oswal said Mumbai was likely to see 7,000 property registrations in September 2021, most in a decade. Already, over 6,000 units have been registered in the first 21 days of September, it said. Godrej Properties, on Wednesday, said it achieved sales of ~575 crore in a single day at the launch of the second phase of its project Godrej Woods in Noida.
A survey by Jll-roofandfloor stated over 80 per cent of prospective buyers are likely to make a purchase within the next three months. Niranjan Hiranandani, MD, Hiranandani Group, said lower rates will boost home sales.
Anuj Puri, chairman, Anarock
Property Consultants, said: “The current time has been correctly identified as one of the unprecedented opportunities where high demand and low property rates coincide. The 2021 festive season will set a new benchmark where the entire industry pulled together to harness latent demand for homes.”
The BSE Realty index has gained 45 per cent this year, outperforming the Sensex, which has risen 23 per cent. Between 2010 and 2020, the sector hugely underperformed the market.
Experts now feel this can be a start of a new bull run. “During the last bull run that started in 2004, home loan rates were around 6 per cent. We are once again at similar levels. Also, there have been excellent salary increments in the IT sector. The bulk of the new real estate demand is in Bengaluru, Gurugram, Noida, Hyderabad where IT professionals are based. After clubbing both these factors, one can say the bear run in the realty sector is ending after 10 years and it is the beginning of a new bull cycle,” said Amit Jain, chief strategist- global asset class and co-founder, Ashika Wealth.
Experts say the real estate sector has also been a key beneficiary of several government initiatives, such as the cut in stamp duty in some regions, the introduction of sector regulator Rera, and schemes for low- and mid-income buyers. Also, the work-from-home phenomenon, too, is seen as a big demand driver. “We expect that this sector will outperform in the coming years. Companies that are looking promising right now are DLF, Oberoi Realty, Godrej Properties, and Sobha. Even investors can also keep an eye on housing finance stocks, such as GIC Housing Finance and PNB Housing Finance,” said Ankur Saraswat, research analyst, Trustline Securities.