The real estate sector has experienced a substantial uptick, marking an 89% surge since its bottom in March 2023. This surge is attributed to robust sales performance and the recent decision by the Reserve Bank of India (RBI) to hold off on rate hikes. However, this surge has also propelled sector valuations (measured by Price-to-Book ratios) close to the peak multiples witnessed in 2021, limiting potential rerating opportunities, according to a report by Jefferies, a foreign brokerage firm.
Despite the sector nearing the peak multiples of 2021, there's potential for upgrades in pre-sales estimates in the latter half of the year due to a favorable response from customers. However, with property stocks already trading at near 15-year high multiples, the margin for error is considerably limited.
The surge in sales during the festive season has been remarkable, witnessing a 20% year-on-year increase to over 50,000 units in the Top-7 cities. Developers are capitalizing on declining inventory levels and strong pricing by initiating new launches in the third quarter to meet the heightened demand.
A strong second-quarter performance, highlighted by a 55% year-on-year increase in pre-sales value, has contributed to a 35% surge in sales for the listed developers in the first half of the year. With promising launches expected in November 2023, a record-breaking third quarter seems probable. The report suggests the potential for further upgrades in pre-sales estimates based on continued robust demand.
Data analysis for October 2023 indicates a promising start to the seasonally strong quarter, following a near-record second quarter. Pre-sales are showing a positive trend with a 25% year-on-year increase in volumes (area sold) across the Top-7 cities, accompanied by a 10% year-on-year gain in blended pricing. Year-to-date sales volumes have also seen a 25% increase, and the promising beginning to the third quarter indicates a sustained momentum till year-end.
(With Agency Inputs)
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