Nifty Realty jumps 45% in 6 months despite high interest rate concerns
Experts say as strong-listed players continue to increase their market share with strong order book and their debt levels coming down significantly, they are being cheered at Dalal Street.
NEW DELHI: Up 45% in 6 months, the Nifty Realty Index continues to surge despite high interest rate concerns, which to an extent has slowed the growth of housing sales. Experts say as strong-listed players continue to increase their market share with strong order book and their debt levels coming down significantly, they are being cheered at Dalal Street.
They also believe the market may have factored in one more rate hike after the hawkish stance maintained by the RBI to tame inflationary pressure in its recent meeting. Mortgage rates offered by most large lenders have gone up by 240-250bps from 6.7% in March 2022 to 9.2-9.3% now.
Among stocks in the index, DLF, which has the highest index weightage at about 26%, has gained 51% in the past 6 months. Shares of Godrej Properties and Macrotech Developers (Lodha), two other heavyweights, have surged 66% and 45%, respectively, during the period.
Narendra Solanki, Head Fundamental Research – Investment Services, Anand Rathi Shares and Stock Brokers, said, “After facing a wave of challenges following the Covid-19 pandemic, the real estate sector has registered strong growth with a massive uptick in demand. Despite the rise in interest rates, credits to the real estate sector have been rising which indicates that the real estate sector is growing and people are investing in the sector. This also indicates that the banking sector is positive about real estate and willing to provide capital for the construction of commercial and housing projects.”
Analysts at ICICI securities in a recent note have said listed developers in their coverage universe (ex-REITs) have been able to bring down their consolidated net debt levels by 37% to `27,300 crore (ex- DCCDL) between Q4FY20-Q1FY24. They also noted that interest rate hikes may not significantly impact demand as overall affordability levels as per HDFC Limited, remain healthy at 3.3x annual income, the best in the last 25 years. ICICI has a buy-and-add rating on DLF, Oberoi Realty, Prestige, Brigade, Mahindra Lifespaces, Sobha and Sunteck Realty.
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