Nifty Realty index surges 5%; Indiabulls Real Estate, DLF rally up to 13%

Indiabulls Real Estate said the affordability of real estate is at a multi-year high with declining interest rates

Shares of real estate companies rallied at the bourses on Tuesday, with the Nifty Realty index surging nearly 5 per cent after Indiabulls Real Estate said it is seeing high demand for completed products, and continues to expect robust collections for the rest of the financial year.

In an investor presentation, the Mumbai-based real estate developer said the affordability of real estate is at a multi-year high with declining interest rates. The stock of Indiabulls Real Estate zoomed 13 per cent to Rs 87.90 on the National Stock Exchange (NSE) on Tuesday on the back of heavy volumes. A combined 10.25 million equity shares have changed hands on the counter on the NSE and BSE, so far.

At 10:04, Nifty Realty index, the top gainer among sectoral indices, was up 4.8 per cent, as compared to 0.79 per cent gain in the Nifty50 index. The realty index hit an intra-day high of 341, was trading close to its 52-week high level of 346.50, touched on January 13.

Among individual stocks, DLF hit a 52-week high of Rs 296 after rallying 7 per cent in intra-day trade on the NSE. In the past one month, the stock has surged 27 per cent, against 4 per cent rise in the Nifty50 index. Godrej Properties, Prestige Estate Projects, Sobha, Oberoi Realty and Brigade Enterprises were up in the range of 3 per cent to 4 per cent.

Over the last six months, residential real estate has witnessed a strong recovery wherein almost all top cities are clocking record sales as compared to previous years. Customers and investors who had stayed away from residential real estate over the last 4 to 5 years are returning to the sector.

"While some part of this recovery may be attributed to pent-up demand, developer discounts and temporary stamp duty waivers, a large part of it is on the back of fundamental factors such as multi-decadal low interest rates, bottomed-out pricing creating a room for price rise in future and a general increase in need for owning a home in light of Covid," Sharad Mittal, Director and CEO of Motilal Oswal Real Estate said in pre budget note.

In Q3FY21, ICICI Securities expects key highlight to be strong residential sales volumes growth for real estate companies, led by factors like pent-up demand, benign interest rates, and measures like stamp duty cut in Maharashtra. However, financial numbers of real estate companies will look optically weak due to rental waiver in retail segment, sub-optimal hospitality portfolio, albeit quarter on quarter (QoQ) growth will be robust, it said.