Real estate stocks have made a strong comeback over the past year after nearly a decade of falling out of favour.
The Nifty Realty Index has more than doubled over the past year and gained over 22% since January this year compared with Nifty50 gains of over 2%.
Pratik Gupta, CEO and Co-Head at Kotak Institutional Equities says the rally, particularly for the residential players that he prefers, has been aided by a bunch of factors apart from the strong demand revival.
"We are seeing very strong volume uptick. It's not being driven by pricing alone. And in the last down cycle, a lot of these companies deleveraged quite a lot. Governance levels have also improved dramatically. To that extent, we like the residential real estate plays, we think there will be continued surprises in terms of the volumes," he said.
The demand-supply dynamics favour the companies, with supply shortfalls expected to spread from metro cities to smaller cities and towns.
Gupta's observations echo those of Anuj Puri from Anarock Research, who told CNBC-TV18 that home inventory is currently near seven-year lows.
Another factor that makes this a more sustainable rally is that real estate players are being more disciplined in terms of pricing unlike a few years ago.
The Interest rate outlook also looks reasonably stable and there may even been a rate cut in the later part of the year, which will aid demand, he noted.
He expects government policies also to become increasingly supportive of the sector.
Residential upcycles tend to last many years and we are still in the early stages, he added.
The Nifty Realty Index has more than doubled over the past year and gained over 22% since January this year compared with Nifty50 gains of over 2%.
Pratik Gupta, CEO and Co-Head at Kotak Institutional Equities says the rally, particularly for the residential players that he prefers, has been aided by a bunch of factors apart from the strong demand revival.
"We are seeing very strong volume uptick. It's not being driven by pricing alone. And in the last down cycle, a lot of these companies deleveraged quite a lot. Governance levels have also improved dramatically. To that extent, we like the residential real estate plays, we think there will be continued surprises in terms of the volumes," he said.
The demand-supply dynamics favour the companies, with supply shortfalls expected to spread from metro cities to smaller cities and towns.
Gupta's observations echo those of Anuj Puri from Anarock Research, who told CNBC-TV18 that home inventory is currently near seven-year lows.
Another factor that makes this a more sustainable rally is that real estate players are being more disciplined in terms of pricing unlike a few years ago.
The Interest rate outlook also looks reasonably stable and there may even been a rate cut in the later part of the year, which will aid demand, he noted.
He expects government policies also to become increasingly supportive of the sector.
Residential upcycles tend to last many years and we are still in the early stages, he added.
(Edited by : Shweta Mungre)
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