Realty stocks soar on back of robust sales; sectoral index up 7.8%

The BSE Realty index—a gauge for the performance of real estate stocks—on Monday rose 4.2 per cent, extending its two-day advance to 7.8 per cent. The latest gains come on the back of robust sales posted by realty developers for the three-month period ending March (Q4FY23). On Thursday, the rate-sensitive index had gained 2.9 per cent following the Reserve Bank of India’s decision to pause the interest rate hike.

On Monday, Godrej Properties announced that it has posted its highest-ever quarterly and annual sales. The company's share price rose 9.1 per cent and was the best-performing stock on the BSE Realty index.

Earlier, Sobha Developers had posted its highest annual sales of Rs 5,198 crore in the financial year 2022-23 (FY23).  In the fourth quarter, the company said it achieved the highest-ever quarterly sales value, up by 2.7 per cent over Q3FY23 and 31.9 per cent compared to the same period in the last fiscal.

Similarly, Macrotech Developers in its exchange filing said it has achieved its best-ever annual pre-sales performance of Rs 12,064 crore. And it has managed to post pre-sales worth more than Rs 3,000 crore for the third consecutive quarter. Mumbai-based Ajmera Realty said it recorded a sales value of Rs 140 crores in Q4FY23, an increase of 10 per cent sequentially. It said it has achieved best-ever sales performance in FY23, almost double that of preceding fiscal.

The strong numbers boosted hopes of a housing upcycle. Analysts said the realty companies were beneficiaries of inflation which also led to a rise in asset prices.

"Inflation is positive for real estate because the land asset prices shoot up. Many realty companies were sitting on high inventory both land and partly developed assets. In the last six months, real estate prices went up 10-20 per cent. I see another 15-20 per cent upside for realty stocks," said G.Chokkalingam, founder of Equinomics.

"Record pre-sales numbers by real estate companies along with a pause in an interest rate hike by RBI and a further improvement in demand could keep real estate in momentum going forward as well," added Siddhartha Khemka, head of retail research, Motilal Oswal.

Analysts, however, asked investors to observe discretion when it came to buying realty stocks.

"It's better to buy stocks that have lower debt compared to their peers," said Chokkalingam.