Godrej Properties, Sunteck Are Jefferies' Two Preferred Realty Stocks
Developers are likely to announce a record third quarter with strong launches coming through in November, the brokerage said.
Godrej Properties Ltd. and Sunteck Realty Ltd. have emerged as Jefferies Financial Group Inc.'s two preferred real estate stock picks based on their attractive relative valuations.
This is despite real estate sector valuations hovering near the 2021 peak multiples, with Jefferies seeing reduced rerating headroom. The realty index has surged 89% since its March 2023 bottom following strong sales and an RBI rate-hike pause.
Shares of GPL and Sunteck have clocked in a 48% and 45% gains, respectively, year-to-date basis. In the one-month period, the stocks have fetched 12% and 17% returns, respectively.
The momentum in the Indian property market in the third quarter will continue, with a strong festive season driving the October sales to a 20% surge to over 50,000 units in the top seven cities, Jefferies said in a note.
With inventory levels declining and presales seeing a 25% growth year-on-year, the brokerage said a good start to the third quarter suggests that the momentum would continue till the year-end.
Developers are pushing for new launches in the third quarter to capitalise on this demand. Jefferies said a record third quarter is likely, with strong launches coming through in November.
The brokerage had raised the pre-sales estimate for its covered developers by 7% in the second quarter. It said a strong offtake could imply more upgrades.
A reintroduction of the interest subsidy for affordable housing schemes is awaited following Prime Minister Narendra Modi's Independence Day speech. Proposed incentives are likely after the state elections and in the run-up to the budget, according to Jefferies.
Among the stocks it tracks, the brokerage said key beneficiaries would include Sunteck and Macrotech Developers Ltd., GPL and Prestige Estates Projects Ltd. as they also have significant lower-ticket apartments as part of their projects.
