Nifty Realty soars 84% from March low; Prestige, Lodha rally 100% in 7 mths

In Wednesday's trade, Nifty Realty rose 3 per cent to Rs 683.30, which was also its highest level since September 8, 2008

Shares of real estate companies continued their northward movement with the Nifty Realty index hitting an over 15-year high of 683.30 in Wednesday’s intra-day trade on healthy business outlook.

Nifty Realty index rose 3 per cent, quoting at its highest level since September 8, 2008 today. In comparison, the Nifty 50 was up 1 per cent at 19,635 at 12:50 PM.

Macrotech Developers (Lodha), Brigade Enterprises, Oberoi Realty, Prestige Estates Projects, Sobha, Godrej Properties, DLF and Signature Global (India) were up 2 to 6 per cent on the National Stock Exchange (NSE) on Wednesday.

Since March 28, 2023 level, the Nifty Realty index has surged 84 per cent as compared to a nearly 16 per cent rise in the Nifty 50 index.

During this period, shares of Prestige Estates Projects (up 119 per cent), Kolte Patil Developers (118 per cent), Lodha (113 per cent) and Sobha (105 per cent) have more than doubled.

While DLF, Godrej Properties, Oberoi Realty, Sunteck Realty, Indiabulls Real Estate and Brigade Enterprises have rallied between 55 per cent and 80 per cent over this time.

The Reserve Bank of India (RBI) in its latest monetary policy reaffirmed the GDP growth rate of 6.5 per cent for the financial year 2023-24 (FY24), making India the fastest-growing major economy in the world.

The RBI also indicated that interest rates at this time have peaked. And unless there are significant black swan events, the interest rates are unlikely to go higher from where they are today.

According to Lodha’s management, on the ground demand conditions continue to strengthen on the back of strong affordability and consumer confidence.

"Intense competition among mortgage providers coupled with the RBI pause and the expected downward trajectory for rate cycle in 2024 means that we have already seen the peak of mortgage rate", the management said.

Likely reduction in mortgage rate as well as government’s affordable housing incentives will act as a further tail wind for the demand especially for the affordable segment where the company has significant presence, it added.

Gaurang Shah, Senior Vice President at Geojit Financial Services expects the earnings of realty companies to improve going forward on strong demand as interest rates have stabilised.

"A large possibility of interest rates cut coming through next year depends on the recovery in domestic data points. Large projects getting executed and the number of registration run rates also being on the higher side can possibly last for some time going forward from here," said Shah.

Meanwhile, with core inflation easing in October, it will likely undershoot headline by 60 bps in FY24. Easing core inflation and relatively elevated food inflation in H2FY24 will keep the RBI on hold, with a focus on the durable elements of inflation, said analysts at Emkay Global Financial Services.