FY24 was the best-ever year for absorption across residential real estate with pan-India sales crossing a billion square feet mark. Since FY21, pre-sales in the top 7 markets have largely been ahead of new launches, leading to a sharp reduction in inventory levels to 11 months.
Among the listed players, Godrej, Prestige, Signature and Brigade delivered very strong growth in FY24. In terms of unsold inventory, the industry is at multi-year lows and new launches continue to see a strong response.
“We expect this momentum to continue in FY25E, and are building in the market growth of 18% (volume growth of 12% and 6% escalation in prices) and a moderate increase in supply, which should be in line with annual absorption,” said JM Financial in its report.
Here is what they say on their preferred picks from the sector:
DLF: Buy| Target price: Rs 1,000
DLF delivered a steady performance in FY24 on a high base, with robust collections and operating cash flows — both of which were at record highs. It expects FY25E pre-sales to cross Rs 17,000 crore. DLF, with its prominent brand equity, favourable home market dynamics and superior execution skills, is best placed to benefit from the sector upcycle. A strong (net-cash) balance sheet, consistently high EBITDA margin and robust cash flows give additional comfort.
Macrotech Developers: Buy | Target price: Rs 1,480
Macrotech Developers (Lodha) should be able to consolidate its leadership position further, led by its robust sales machinery and a healthy mix of premium, mid-income and affordable projects, coupled with existing tailwinds across the residential cycle. It has also continued to expand into segments such as logistic parks, commercial and retail, as part of mixed-use developments, to strengthen its position as a top developer across product categories and customer segments. The stock has come down from recent highs post the 1QFY25 results, which leaves a 27% upside to JM Financial’s NAV.
Oberoi Realty: Hold | Target price: Rs 1,820
Oberoi Realty has delivered a strong operational performance over the last 4 years, led by new launches and a strong property market. With a few of its major projects either completed or nearing completion, big upcoming launches in Pokhran Road (Thane), NCR and the redevelopment project in Adarsh Nagar, Worli, pre-sales are likely to gain strong momentum. Cash collections are also expected to be robust, as a majority of the construction cost in its legacy projects has been incurred, with substantial unsold inventory in hand.
Sobha: Hold | Target price: Rs 1,755
Sobha Developers is one of the leading real estate developers in Bengaluru with a market share of 4-6% for the last 7 years. It has a unique backward integrated business model that helps maintain control over the quality and delivery of the real estate product. The company has a launch pipeline of 18msf (as of 1QFY25), so JM Financial expects it to launch approximately 8-9msf of projects annually over the next 2-3 years, and presales to grow to Rs 8,600 crore in FY26E. The land bank should also get re-rated as pre-sales continue to grow, leading to further upside.
Keystone Realtors: Buy| Target price: Rs 895
Keystone Realtors is a prominent real estate developer in MMR (in terms of absorption in number of units) in the micro markets. Keystone has added 16 projects with a gross development value (GDV) of nearly Rs 15,000 crore in the last 24 months since FY23. This strong momentum in business development is expected to be reflected in Keystone’s performance in the next few quarters in new launches and pre-sales.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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