According to Jefferies, property prices are expected to climb by 10% year-on-year, likely increasing by 25-30% over the next three years. Nifty Realty has surged by over 55% this year, surpassing other major sectors. This growth is due to strong demand, fewer available properties, and sellers calling the shots in the market.
Investors, both from the stock market and high-income groups, are showing a keen interest in prime real estate, causing a surge in demand for real estate stocks. However, some analysts suggest that the continuous surge might raise questions about the prices being too high.
The story in real estate stocks highlights a boom in luxury homes, while commercial properties faced challenges due to funding issues for startups and higher interest rates for a prolonged period.
Data from Propequity shows that homes now are about 50% larger than before COVID-19, with premium and luxury housing making up 75% of this year’s market share, up from 60% pre-COVID in fiscal year 20.
Amar Ambani from Yes Securities believes that listed developers will likely maintain their growth as the market consolidates. These well-known developers often charge higher prices, resulting in better profit margins, especially for companies like Oberoi.
Between 2004 and 2008, real estate was booming, leading to excessive land purchases. But from 2010, sales slowed, inventory piled up, construction lagged, and projects stalled. Factors like GST and demonetization also impacted spending.
Niket Shah from Motilal Oswal Asset Management notes that the COVID pandemic triggered a renewed interest in property purchases. People wanted larger spaces for work and investment safety, attracting high-income individuals and non-resident Indians to invest in real estate.
As a result, inventory levels decreased significantly, particularly in places like Mumbai, now sitting below 15 months, with luxury inventory at about a year or less.
According to a Motilal Oswal report, companies with less than 10 months of inventory are expected to double their launches to 60 million square feet in the latter half of FY2024, reaching a value of Rs 82,000 crore from Rs 26,000 crore.
November 2023 witnessed notable project launches by listed companies, including Oberoi’s Kolshet project and Lodha’s Mirabelle Manyata project in Bengaluru.
With a decrease in available properties, prices have started to climb, especially in major cities like Mumbai, Delhi, Bengaluru, and Hyderabad. This increase further boosts investor confidence that was previously hesitant about investing in real estate.