India's Real Estate Sector Poised for Growth Amid Government Reforms
Realty stocks surge due to pent-up demand and limited supply, with residential real estate absorption up 14% and realisations rising 10%.
Real EstateIndiaGovernment PoliciesBudget ReformsHousing MarketReal EstateJul 25, 2024
Stable interest rates and affordability are expected to sustain growth in the near term, as listed players expand into new markets. According to Motilal Oswal Financial Services, the Realty Index has reflected strong pre-sales performance since early CY22, driven by a 35% increase in new launches, of which 53% were absorbed. The absorption rate improved to 53% in FY24 from 48% in FY23.
Finance experts believe the sector is undervalued, with potential for growth due to the government's focus on infrastructure and income tax reforms. Kotak Securities notes that existing inventory is at a multi-year low, with strong demand for new launches.
Several factors influence realty index performance, including economic indicators, property prices, availability of credit, government policies, and global events. The Realty Index has jumped three-fold since the RBI paused rate hikes in April 2023, trading at a 10% premium to pre-sales growth.
Investing in real estate stocks and REITs offers diversification and potential capital appreciation. REITs provide income-oriented investors with regular dividend payouts and liquidity. Both options require careful consideration of market conditions, regulatory environment, and company performance.
Real estate stocks have proven to be a hedge against inflation, with prices rising consistently since 2013. The sector is expected to see healthy growth over the next 3-4 years, prompting listed companies to explore new geographies and consider IPOs.
Motilal Oswal Financial Services is a leading financial services company in India, providing a range of services including broking, investment banking, and wealth management.Kotak Securities is a prominent stockbroking and investment advisory firm in India, offering a range of financial products and services.The Indian government has introduced several initiatives to boost the real estate sector, including the Pradhan Mantri Awas Yojana (PMAY) scheme, which aims to provide affordable housing to all by 2022.
Frequently Asked Questions
What is driving the growth of the Indian real estate sector?
The sector is experiencing growth due to pent-up demand, limited supply, and government policies and budget reforms.
How has the Realty Index performed in recent times?
The Realty Index has jumped three-fold since the RBI paused rate hikes in April 2023, trading at a 10% premium to pre-sales growth.
What are the benefits of investing in real estate stocks and REITs?
Investing in real estate stocks and REITs offers diversification and potential capital appreciation, with REITs providing income-oriented investors with regular dividend payouts and liquidity.
What is the outlook for the Indian real estate sector in the next 3-4 years?
The sector is expected to see healthy growth over the next 3-4 years, prompting listed companies to explore new geographies and consider IPOs.
How do real estate stocks perform during periods of inflation?
Real estate stocks have proven to be a hedge against inflation, with prices rising consistently since 2013.
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