Foreign brokerages are expecting sales in the realty sector which have shown improvement in September quarter to trend up further. In recent reports, analysts at CLSA, Morgan Stanley and JPMorgan expect sales to be strong in the December quarter on the back of a seasonally strong festival season, expectation of rate cuts and improving liquidity. In addition to this in a recent report, Saurabh Kumar and Gunjan Prithyani of JPMorgan say that improving liquidity, increase in project approvals and a seasonally strong second half bode well for the real estate sector
Improving sales
Despite the weak economic environment, residential sales have been looking up in the September quarter. A CLSA report says that residential sales for September quarter for Mumbai and NCR shows resilience despite weaker macros and seasonality. Further, across markets sales have risen both on a sequential (6-20 per cent) and year-on-year (26-111 per cent) basis. With mortgage rate cuts possible in December, the upcoming festive season could see buoyant sales. A mong key markets Mumbai is being watched due to the sharp uptick in launch activity (under the DCR norms) which comes after a gap of nearly two years.
Bangalore, NCR players preferred
Despite the jump in prices, analysts recommend realty players with strong balance sheets and strong revenue visibility. J P Morgan analysts feel that valuations in the sector are attractive despite the 22 per cent jump in the BSE Realty index over the last month. The top pick of the research house is Prestige Estates due to growth prospects on the back of strong pre sales momentum and rentals. Morgan Stanley analysts Sameer Baisiwala and Harshal Pandya say that the pent up demand in the metros is significant and should play out even in the face of economic slowodown. They put their faith on Sobha Developers, IBREL, Prestige and Oberoi Hotels which fit into their theme of companies with healthy balance sheets, scale up visibility and reasonable valuations. CLSA on the other hand prefers NCR vis-à-vis Mumbai and Bangalore based developers such as JP Infratech/Unitech and Sobha .
