Shares of real estate companies continued at their upward movement for a second straight day on Monday after the Reserve Bank of India (RBI), last Thursday, kept the repo rate unchanged.
At 01:08 PM, Nifty Realty index, the top gainer among sectoral indices, was up nearly 4 per cent, as compared to 0.50 per cent rise in the Nifty 50. The realty index has rallied 7 per cent in the past two trading days, as against 0.73 per cent gain in the benchmark index.
Among individual stocks, Godrej Properties, Prestige Estates Projects and DLF soared between 5 per cent and 9 per cent, while, Sobha, Brigade Enterprises and Macrotech Developers (Lodha) gained up to 3 per cent on the National Stock Exchange (NSE).
According to analysts, the surprise move would provide further boost to the affordable and mid-income housing segments, in particular. Coupled with the Central Government also hiking its outlay for the PMAY programme during this year’s Budget, the Confederation of Real Estate Developers' Association of India (CREDAI) expects the demand for affordable housing to grow in the upcoming quarters.
"In FY23, the RBI cumulatively hiked the repo rate by 250bps from 4 per cent to 6.5 per cent., levels last witnessed in Jan 2019. From a housing market perspective, despite a sharp rise in repo rate, which has immediately transmitted into lending rates, the housing demand has continued to sustain thus far," CREDAI said.
The real estate market has weathered multiple home loan interest rate increases from a low of 6.5 per cent to 8.75 per cent, supported by favourable house purchase affordability, and the strong desire towards home ownership. Therefore, a pause in any further rise in the lending rates should support the existing growth momentum in the housing sector, said Shishir Baijal, Chairman & Managing Director, Knight Frank India.
Meanwhile, among individual stocks, Godrej Properties soared 9 per cent to Rs 1,225 after the company reported highest-ever quarterly and annual sales. The company reported total bookings of Rs 4,051 crore in January-March quarter (Q4 FY23). In entire FY23, booking value grew by 56 per cent year-on-year (YoY) to Rs 12,232 crore.
The management said sales growth for the year was on the back of both, an improving project mix as well as strong volume growth of 40 per cent. The robust sales performance has translated into record collections growth of 41 per cent to Rs 8,991 crore backed by strong project completions of over 10 million sq. ft, it added.
Shares of Ajmera Realty Infra (ARIL), too, rallied 7 per cent to Rs 314.35 on the BSE after the company said that it firmly believes that its strong cash generation will pave the way for business development prospects and debt deleveraging, thereby enhancing growth visibility.
The company's FY23 performance, surpassing the peak sales of the Covid period, shows the sustained housing upcycle driven by strong affordability, job creation, and income growth, the management said.
ARIIL clocked sales value of Rs 834 crore and collection of Rs 532 crore for FY23, registering a growth of 93 per cent and 35 per cent, respectively, as compared to FY22 on the back of robust sales, and good construction pace.
That apart, shares of DLF surged 6 per cent to Rs 405.10 on the BSE. The stock was quoting close to its 52-week high level of Rs 418.45, touched on December 5, 2022. According to rating agency ICRA, DLF Group’s strong operating performance in FY23 is expected to sustain in FY24, supported by continued end-user demand and good affordability.
"DLF's liquidity is strong with around Rs 1,749 crore cash and liquid investments as on December 31, 2022. Strong sales from the new launches as well as existing projects during 9MFY23 translated into healthy collections, while rendering visibility to future collections from the pending receivables," ICRA said in rationale.
Significant revenue diversification from different segments and geographies, along with continued momentum in sales and collections, resulting in significant improvement in cash flows, leverage and liquidity position may trigger a rating upgrade, the rating agency said.