The recent decision of the Reserve Bank of India (RBI) to pause the repo rate hikes in its April meeting has boosted the shares of real estate companies. The Nifty Realty index, which was largely impacted by the rate hikes, has witnessed a surge in its performance since the RBI's decision, along with strong sales posted by real estate developers in the March quarter.
The index jumped nearly 10.50% in just eight trading sessions following the MPC decision on April 06. From its March 28 lows of 372, the index has gained approximately 63 points to 434.15 to date, producing a return of close to 16.70%.
Over the last one month, seven of the 10 constituents of the index have generated returns ranging from 4% to 15%. Godrej Properties tops the list, followed by DLF, Phoenix Mills, Macrotech Developers, Brigade Enterprises, Prestige Estates Projects, and Oberoi Realty.
The real estate sector was greatly affected as the RBI started increasing its repo rate from May of last year which lasted till February 2023, with a total increase of 250 basis points. The rise in input costs due to the increase in raw material prices impacted the sector.
It is worth noting that the real estate sector had been facing a tough time even before the RBI rate hikes. The sector was already reeling under the impact of the COVID-19 pandemic and the subsequent lockdowns, which led to a significant drop in sales and construction activities.
However, the recent pause in rate hikes, along with a fall in raw material costs and strong demand, has provided a silver lining for the sector. Analysts believe that these positive developments will benefit real estate companies going forward.
In Q4 FY23, leading real estate players reported record sales bookings. Godrej Properties said its Q4 FY23 bookings stood at ₹4,051 crore, and its FY23 booking value grew by 56% to ₹12,232 crore.
The company also claimed it saw its highest-ever quarterly and annual project deliveries in Q4 and FY23. As per the BSE filing, the company delivered projects aggregating over 10 million sq. ft. across five cities in FY23, including 7.6 million sq. ft. in Q4.
Another real estate firm, Macrotech Developers, which sells properties under the "Lodha" brand, said it has delivered a strong pre-sales momentum with sales bookings of ₹3,025 crore in the Q4 of FY23 and ₹12,064 crore for the 2022–23 fiscal.
The company said it has surpassed the full-year guidance of ₹11,500 crore. The company added 12 projects in FY23. This has a sales potential of around 14 million sq. ft. of about ₹19,800 crore.
On similar lines, Sobha recorded its best-ever quarterly sales in the three months that ended in March 2023. In Q4 of FY23, the company said that it has once again recorded its best-ever sales quarter with a value of Rs. 1,463 crore and a sales volume of 1.48 million sq ft.
According to the company, the average price realization has improved by 2.5% from the previous quarter (Q3-FY23) and is now at Rs. 9,898 per square foot. This also represents a growth of 19.8% compared to the same period last year (Q4-FY22).
In Q4 FY23, real estate companies are anticipated to deliver strong performance, as per predictions made by domestic brokerage firms.
HDFC Securities expects the aggregate revenue, EBITDA, and PAT for its coverage universe to report sequential growth of 21.7%, 17.7%, and 5.9%, respectively. On an aggregate level, the brokerage is anticipating the sequential margin to shrink by 84 bps QoQ.
“We expect decent execution for construction companies on a YoY basis. For real estate companies, sales volume growth is likely to be healthy, led by launches, ” said ICICI Direct Research.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.