Realty stocks have surged post-Lok Sabha elections, driven by new government housing policies. The upcoming 2024 budget, expected to reform GST and lower taxes, will boost consumption. Realty stocks are bullish due to pent-up demand and limited supply, with residential real estate absorption up 14% and realisations rising 10% in FY24. Steady interest rates and affordability support growth as listed players expand. Motilal Oswal reports a 35% increase in new launches and improved absorption rates. Experts see the sector as undervalued, with growth potential from infrastructure and tax reforms, prompting companies to explore new markets and IPOs.
The Lok Sabha election results have positively impacted realty stocks, driven by post-election momentum and the new government's housing policies. The anticipated 2024 budget is expected to reform GST and reduce taxes for lower-income brackets, further stimulating consumption. Realty stocks are showing a bullish trend due to pent-up demand and limited supply, with the residential real estate sector experiencing a 14% growth in absorption and a 10% rise in realisations in FY24.
Steady interest rates and affordability are expected to sustain growth in the near term, as listed players expand into new markets. According to Motilal Oswal Financial Services, the Realty Index has reflected strong pre-sales performance since early CY22, driven by a 35% increase in new launches, of which 53% were absorbed. The absorption rate improved to 53% in FY24 from 48% in FY23.
Finance experts believe the sector is undervalued, with potential for growth due to the government's focus on infrastructure and income tax reforms. Kotak Securities notes that existing inventory is at a multi-year low, with strong demand for new launches.
Several factors influence realty index performance, including economic indicators, property prices, availability of credit, government policies, and global events. The Realty Index has jumped three-fold since the RBI paused rate hikes in April 2023, trading at a 10% premium to pre-sales growth.
Investing in real estate stocks and REITs offers diversification and potential capital appreciation. REITs provide income-oriented investors with regular dividend payouts and liquidity. Both options require careful consideration of market conditions, regulatory environment, and company performance.
Real estate stocks are a proven hedge against inflation, with prices rising consistently since 2013. The sector is expected to see healthy growth over the next 3-4 years, prompting listed companies to explore new geographies and consider IPOs.
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