Indian Real Estate Sector Set for Continued Growth, Says JM Financial
India's real estate sector has reached unprecedented heights, with a remarkable surge in residential property demand across key cities. JM Financial predicts a seamless continuation of FY24's stellar performance into FY25.
Indian Real EstateJm FinancialDlfMacrotech DevelopersKeystone RealtorsReal EstateAug 28, 2024
Defying expectations, the demand juggernaut has continued unabated, with luxury projects selling out within days of pre-launch. This phenomenal success has triggered a bull run in real estate stocks, which is expected to sustain, according to JM Financial projections.
The brokerage firm predicts a seamless continuation of FY24's stellar performance into FY25. It said FY24 marked a historic high for residential real estate absorption, with pan-India sales surpassing a staggering 1 billion square feet. Since FY21, the top 7 markets have consistently seen pre-sales outpace new launches, resulting in a drastic reduction in inventory levels to just 11 months.
Godrej Properties, Prestige, Signature Global, and Brigade emerged as top performers among listed players, posting remarkable growth in FY24. The industry's unsold inventory has hit multi-year lows, and new launches continue to attract strong demand.
Looking ahead, the brokerage predicts a continuation of this momentum in FY25E, with an anticipated 18% market growth driven by 12% volume expansion and 6% price appreciation. Supply is expected to increase moderately, aligning with annual absorption rates.
Furthermore, with substantial cash flow growth on the horizon, developers are likely to prioritize business development over debt reduction, setting the stage for sustained growth.
The brokerage favors developers with a proven track record of timely project launches and strategic business development. Against this backdrop, it has initiated coverage on five real estate companies, including DLF, Macrotech Developers, Keystone Realtors, Oberoi Realty, and Sobha.
The brokerage has assigned a 'buy' rating to DLF, Macrotech Developers, and Keystone Realtors. It has set a target price of ₹1,000 for DLF, indicating a 20% upside, ₹1,480 for Macrotech Developers, suggesting a 16% upside, and ₹895 for Keystone Realtors, signaling an upside potential of 16.5%.
Meanwhile, Oberoi Realty and Sobha have been assigned a 'hold' rating, with target prices of ₹1,820 and ₹1,755, respectively.
Diversification out of core markets is the key to sustained growth, according to the brokerage. Real estate companies are expanding into new micro-markets to reduce their reliance on core regions and capitalize on growth opportunities.
Two major themes consolidation and premiumisation. According to JM Financial, the top 10 listed developers have made significant inroads into the market, steadily chipping away at the informal segment's share.
Rapid sales of high-quality launches have created a shortage of such inventory, pushing prices higher. Developers are also launching new phases of existing projects at increased price levels.
Disclaimer The views and recommendations given in this article are those of individual analysts. These do not represent the views of the publication. We advise investors to check with certified experts before taking any investment decisions.
About JM Financial JM Financial is a leading financial services company in India, providing a range of services including investment banking, equity research, and brokerage.
Frequently Asked Questions
What is the current state of the Indian real estate sector?
The Indian real estate sector has reached unprecedented heights, with a remarkable surge in residential property demand across key cities.
What is JM Financial's prediction for the real estate sector in FY25?
JM Financial predicts a seamless continuation of FY24's stellar performance into FY25, with an anticipated 18% market growth driven by 12% volume expansion and 6% price appreciation.
Which real estate companies have been assigned a 'buy' rating by JM Financial?
DLF, Macrotech Developers, and Keystone Realtors have been assigned a 'buy' rating by JM Financial.
What is the target price set by JM Financial for DLF?
JM Financial has set a target price of ₹1,000 for DLF, indicating a 20% upside.
What is the key to sustained growth in the real estate sector, according to JM Financial?
Diversification out of core markets is the key to sustained growth, according to JM Financial.
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