Though the BSE realty index has fallen 47% in three months, Jefferies says only the strong will survive and make gains.
The BSE Realty index has gained just 0.9 percent from its March lows though the benchmark Sensex gained 20 percent during the period. Even if one was to calculate returns from its January high, the index is still down 47 percent in more than three months.
The demonetisation, GST, and RERA increasingly made real estate norms stricter, resulting in a dramatic drop in cash transactions. Also, the demand for real estate was low due to high prices.
To revive demand, the government took some steps in 2019. The RBI, too, stepped in by reducing interest rates, but the lockdown has dealt a huge blow to the employment-generating sector.
Stocks were down 44-60 percent from their 2020 peak, pricing in a 20 percent plus capital value decline but the seven-year-long weak residential cycle set a good base to bounce back, CNBC-TV18 quoted Jefferies as saying.
Survivors would make disproportionate gains and consolidation would get a boost as disruptions weeded out the weak hands, it said.
Many companies in the last several years either shut down their operations or sold projects to other companies.
Jefferies initiated coverage on five stocks with a buy rating with Godrej Properties as its top pick.
The brokerage advised buying DLF with target at Rs 186, Godrej Properties with target at Rs 945, Oberoi Realty with target at Rs 423, Prestige Estates with target at Rs 246 and Sobha with price target at Rs 311 per share.
Godrej Properties had during the lockdown in April added two new projects in Worli and Matunga East, Mumbai.
Also just a few days before the lockdown began on March 25, Godrej Properties acquired 100 percent issued and paid-up share capital of the Ceear Lifespaces Private Limited.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.