Synopsis: Housing sales in India rose by 16% YoY in value terms in November 2024, while volume trends showed a contrasting decline. Nuvama Institutional Equities highlighted realty stocks like Prestige Estates Projects Ltd and Brigade Enterprises Ltd as attractive medium-term investments amid rising market consolidation. Upcoming rate cuts and strong launch pipelines are expected to further boost the sector.
The Indian real estate market is showcasing a promising trajectory, with housing sales by value improving 16% year-on-year (YoY) and 2% sequentially in November 2024, according to a report by Nuvama Institutional Equities.
This growth comes despite a divergence between volume and value trends, reflecting a premiumisation shift in the property market.
Divergence in Volume-Value Trends:
While demand in the top-7 cities fell 7% YoY by volume, it rose 16% YoY in value terms during November.
Similarly, supply dropped 53% YoY in volume but only 44% YoY in value. Year-to-date (YTD) supply and demand have increased by 9% and 13% YoY, respectively, when measured by value.
The unsold inventory value rose by 5% YoY, but the inventory months reduced to 16 months compared to 17 months in October.
Nuvama attributes this shift to the ongoing premiumisation trend, which is shaping a new landscape for India's property sector.
Factors Driving Future Growth:
Nuvama emphasized that several factors could fuel further growth in the real estate market:
- Rate Cuts on the Horizon: The Reserve Bank of India (RBI) has maintained the policy repo rate at 6.5% since February 2023, but market watchers anticipate a potential reduction in February 2025.
- Launch Pipelines: Strong launch pipelines in the second half of FY25 are expected to boost supply.
- Business Development: Developers with robust balance sheets are positioned to benefit from attractive business development opportunities.
Stock-Specific Insights:
Nuvama retained its "Buy" ratings for Prestige Estates Projects Ltd and Brigade Enterprises Ltd.
These stocks have significantly outperformed the benchmark BSE Sensex, with gains of 47.20% and 41.13%, respectively, in 2024. In contrast, the Sensex rose by 8.58% during the same period.
The report highlighted that developers with extensive land banks and strong financial stability are well-poised for market share gains.
Prestige Estates and Brigade Enterprises were identified as top picks, with a high probability of re-rating as investor confidence in housing sales strengthens.
Conclusion:
The Indian real estate market is at a pivotal juncture, characterized by rising consolidation and a premiumisation trend.
While volume trends in the housing sector showed a decline, the substantial rise in value terms underscores the increasing investor confidence.
With potential rate cuts, robust launch pipelines, and developers’ focus on business development, the sector is set to gain momentum in the medium term.
Realty stocks such as Prestige Estates and Brigade Enterprises stand out as attractive investment opportunities.
Disclaimer:
This article is for informational purposes only and should not be construed as financial or investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.
