Realty shares rally up to 8%; Sobha, Lodha, Godrej, Prestige hit new highs

Sobha share price hit a new high of Rs 2,220 as it rallied 8 per cent after the company's board approved the offer and issuance of equity shares for Rs 2,000 crore through a rights issue

Shares of real estate companies continued at their northward movement on Thursday with the Nifty Realty index gaining over 2 per cent on the National Stock Exchange (NSE) in the intraday trade, on a healthy growth outlook.

Sobha, Macrotech Developers (Lodha), Godrej Properties, and Prestige Estates rallied between 3 per cent and 8 per cent today, and were trading at their respective new highs. DLF, Brigade Enterprises, and Oberoi Realty from the index, too, were up in the range of 1 per cent to 2 per cent.

At 10:19AM, the Nifty Realty index was the top gainer among sectoral indices, and was up 2.2 per cent as compared to 0.32 per cent rise in the Nifty 50. In the past six months, the realty index has surged 51 per cent as against nearly 12 per cent gain in the benchmark index. Further, in the past one year, the Nifty Realty index has zoomed 115 per cent as compared to 25 per cent rally in the Nifty 50.

The Indian real estate sector is a key player in the nation's economic development. With promising projections in the market size, GDP contribution, and employment generation, the sector stands as a beacon of growth and opportunity. As India awaits policy reforms to pick up speed, analysts firmly believe that the demand for Real Estate in a country like India will remain strong in the medium to long term.

"In 2024, we anticipate an opportunity for the Indian economy to become a world leader. The real estate sector is likely to continue on its journey of long term growth as we see a continuous rise in GDP per capita, larger disposable incomes, growing urbanisation and most of all a larger focus of the world on us as the next big economy," Oberoi Realty said in its FY24 annual report.

An increase in earning potential, a need for a better standard of living and the growing base of aspirational consumers and their lifestyle changes have led to substantial growth in the sector. With suited economic growth, the premium housing segment will also witness higher demand in the years to come, the Mumbai-based real estate company said.

Among individual stocks, Sobha shares hit a new high of Rs 2,220 as they rallied 8 per cent after the company's board approved the offer and issuance of equity shares of the company for Rs 2,000 crore through a rights issue. The issue is set to open on June 28 and close on July 4, 2024.

On January 22, 2024, the rights issue price was set at Rs 1,651 per equity share, a discount of 25 per cent. The rights entitlement ratio is 6 rights equity shares to be issued for every 47 fully paid-up equity shares of the company held by the eligible equity shareholders. The company has fixed June 19, 2024 as the record date for ascertaining the eligible shareholders for the rights issue.

According to CRISIL, the fiscal 2023 to fiscal 2025 is expected to see CAGR 8 per cent to 10 per cent rise in the residential demand supported by continued urbanisation, steady income profiles, expected growth in employment generating sectors such as Information technology, banking, financial services & insurance (BFSI), financial sectors, and rising affluence and propensity to spend on real estate by mid-income buyers.

The demand in the first half of FY24 has been robust as middle- and high-income group are looking for bigger spaces with better amenities The homebuyers’ need for security and personal space, amenities within residential areas are supporting the demand for residential real estate in six key cities.

Urbanisation provides an impetus to housing demand in urban areas as migrants from rural areas require dwelling units. In 2020, about 35 per cent of the Indian population lived in urban areas of the country and this share of urban population is expected to increase to about 40 per cent by 2030. This trend in urbanization has pushed the demand for houses in urban areas.

Pradhan Mantri Awas Yojana (PMAY) - Urban has added stimulus to the affordable housing segment. The scheme was launched in Fiscal 2016 to provide housing for the economically weaker section of society. The scheme was divided into two schemes: PMAY Urban and PMAY Rural (or PMAY Gramin). The extension has been announced for the rural scheme till Fiscal 2024 end and till December 2024 for the urban scheme in order to achieve targets.

As of March 6, 2024, 11.86 million houses have been sanctioned and 8.1 million houses have been completed. Rs 8.1 trillion investment has been done till March 6, 2024 for 11.86 million sanctioned houses. With this investment, the affordable housing segment has received a considerable boost, the rating agency said in its industry report called 'Assessment of residential real estate industry in selected markets in India'.