The real estate was one of the best performing sectors in the calendar year 2019, with the BSE Realty Index clocking gains of 27 percent.
The government took a series of measures in the second half of the year to revive the sector, the biggest was to reduce goods and services (GST) rate on real estate.
Post-RERA implementation, most small unorganised builders are getting out of business, with large players, especially those with pan-India presence, gaining market share.
In the Budget 2020, the government renewed its commitment to affordable housing by extending the tax holiday by a year, but offered little to resolve the liquidity crunch facing the sector nor did it make loans attractive, which could have boosted homebuyers' sentiment.
The announcement of an optional new income tax regime in the Budget has raised concerns about the impact of scrapping the tax exemption on interest paid on home loans.
Some brokerage believes while there are fears about these measures impacting housing demand, homebuyers and developers are likely to adjust their expectations over the medium term.
"While there may be some short disruption until clarity on the tax issue emerges, we believe that over time, both developers and customers will adjust their pricing expectations to factor in any negative impact of these measures," ICICI Securities said in a report.
The report said the real estate sector was undergoing consolidation in the residential space post-RERA, GST implementation and the NBFC funding crisis, end-users would continue to gravitate towards affordable and mid-income housing launches of large, organised developers.
ICICI Securities has a buy recommendation on DLF, Phoenix Mills, Brigade Enterprises and Sunteck Realty.
Rusmik Oza, Senior VP, and Head of Fundamental Research–PCG, Kotak Securities, said eight large real estate stocks under Kotak's coverage could see a nearly 48 percent rise in earnings in FY20E and a 42 percent in FY21E.
But, he sees an upside in very few names. "Even though the sector might do very well in terms of earnings in the next one year, it may end up underperforming the broader indices," Oza said.
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