Mumbai: There's real money to be made in real estate these days. Brick-and-mortar is slowly emerging from the shadows of virtual sheen, as cuts in stamp duty and financing rates by top lenders such as HDFC, Kotak Mahindra and State Bank of India fuel a rally in property stocks.
Godrej Properties, Oberoi, Puravankara and DLF rallied more than 10% on Thursday, while the Nifty Realty index jumped as much as 9%.
Karnataka has reduced its stamp duty to 3% from 5% on properties below Rs 45 lakh early this week. Meanwhile, Mumbai is likely to see 7,000 property registrations in September, as per estimates provided by Motilal Oswal. Mortgage rates offered by most large lenders range in the 6.5-7.0% range for 20-year housing loans and are the lowest ever historically since 2005.
While initial expectations were for new residential launches to commence from October 2021 to coincide with the beginning of the festive season, the waning of the second Covid wave, record-low mortgage rates, and strong hiring with salary growth in the IT/ITes sector have led developers to advance fresh housing starts in August-September.
"We expect the momentum in real estate demand to be carried forward into the December quarter with festivals of Dussehra and Diwali and expect developers to post record sales booking numbers in the second half of FY22 led by new launches," said Adhidev Chattopadhyay, analyst, ICICI Securities. "We estimate that the pan-Indian residential market share will expand from 25% in FY21 to 29% in FY24, and DLF, Oberoi Realty, Brigade Enterprises, Sunteck Realty, and Mahindra Lifespaces are our top picks."
On an aggregate basis, India's top 10 listed developers have reduced their consolidated net debt by 37% to ₹27,400 crore between the quarters of March 2020 and June 2021. This has been achieved through a combination of reduction in the cost of debt by 80-160 bps, reduction in corporate overheads by 20-40% from pre-Covid levels, operating cash surpluses, asset sales, and equity capital raises either through the qualified institutional placement route or through dilution at the SPV (special purpose vehicle) level.
Shares of Godrej Properties rallied 34% last week, while DLF and Sunteck Realty gained 17% and 11%, respectively. The Indian real estate market is regaining the confidence of even global institutional investors, and they see good opportunities in both equity and debt investments.
"Residential is seeing a significant revival across markets on the back of favorable government policies, pent-up demand of 18 months, attractive pricing, and lowest-ever mortgage costs," said Sharad Agrawal, executive director - capital markets, Knight Frank India. "Investor interest in retail is also coming back as spaces have reopened fully in most markets, and people have restarted evaluating opportunities in that space."
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