Sobha, Brigade Enterprises, other realty stocks rise as RBI leaves rates unchanged

Stable home loan rates improve consumer confidence and enable more informed investment decisions, since there is a noticeable shift in the intent and aspirations of Indian homebuyers, said Ramani Sastri, Chairman and MD, Sterling Developers.

Shares of real estate companies soared up to 7 percent after the Reserve Bank of India's Monetary Policy Committee kept policy interest rates unchanged at 6.5 percent, in-line with market watchers and economists' expectations.

This was the eighth straight instance of the policy rates being left unchanged by the central bank.

The Reserve Bank of India's decision to keep the repo rate unchanged is a boon for the Indian real estate sector, according to Anuj Puri, Chairman - ANAROCK Group.

"This stability ensures that home loan interest rates remain low, making housing more affordable for potential buyers. With unchanged borrowing costs, both developers and homebuyers benefit from increased market confidence and predictability," he said.

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The Indian real estate sector continues to scale new heights and the growth outlook is also projected to be strong. In this context, the status quo stance by RBI is welcome to bolster overall market confidence, according to Ramani Sastri, Chairman and MD, Sterling Developers.

"Stable home loan rates improve consumer confidence and enable more informed investment decisions, since there is a noticeable shift in the intent and aspirations of Indian homebuyers, " he said.

However, a future repo rate cut would serve as a big boost to homebuyer sentiment and enable better affordability, which is an extremely sensitive factor in the housing market, Sastri added.

At 10:48 am on June 7, shares Sobha were trading 7 percent higher. Brigade Enterprises, Sunteck Realty, Mahindra Lifespaces, Macrotech Developers (Lodha), Godrej Properties and DLF rose up to 4 percent.

With the Reserve Bank of India (RBI) pausing rate hikes and real estate developers ramping up business development, Nuvama Institutional Equities believes the sales momentum would improve, particularly for organised developers.

Over the medium to long-term, the brokerage anticipates the consolidation in favour of organised developers to gather steam.

Moreover, rising capital intensity of the realty business, credit crunch and focus on execution are likely to aid developers with strong balance sheets and established brands.

"With the uptick in the housing space along with the comfort on the debt reduction front, developers have ramped up their business development activity, leading to the strengthening of launch pipelines and spurred pre-sales growth," Nuvama said in a report.

Organised developers are witnessing an improvement in their cash flow generation post-COVID, which shall help them gain market share. Developers with robust balance sheets shall also benefit from attractive business development opportunities.

Overall, the brokerage reckons stronger players would gain market share, going ahead. It expects launches to remain contained due to liquidity constraints.

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“We believe realty stocks are attractive from a medium-term perspective in light of rising consolidation. With investors increasingly gaining confidence about housing sales trajectory, we believe the odds for the next leg of re-rating are high for developers with sizeable land banks," Nuvama said.

Its top picks in the sector include DLF, Prestige Estates Projects and Brigade Enterprises. The brokerage firm has a ‘Buy’ rating on these stocks.

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