Real estate pre-sales momentum to sustain in the near term; Valuations near NAV

Property registrations in Mumbai continue to sustain above 12000 mark, with February month clocking 12066 registrations (flat yoy, down 1.5% mom). For FY2025 till February, the same are up 8.7% yoy while in value terms it is up 19.1% yoy, highlighting continued demand for higher ticket size properties. Sustained demand in Mumbai is positive for Oberoi Realty, Macrotech, Sunteck Developers and Godrej Properties among others.

NCR based major BPTP group achieved ₹ 1500 crore of bookings on day 1 of launch in its latest luxury project Amstoria Verti-Greens located along Dwarka Expressway in Gurugram. Despite NCR region witnessing steepest price rise in 2024, it continues to evince interest for luxury projects especially from Grade A developers. The development is positive for NCR based developers like DLF, Max Estates, Signature Global, TARC among others.

Tesla recently leased 4000 square feet space in Mumbai’s BKC for ₹ 35 lakh per month (with escalation of 5% per annum) for five-year term, setting a new benchmark with lease rental rate of over ₹ 880 psf per month (Apple signed 6526 square feet deal in BKC at ₹ 738 psf per month in January 2025). Consequently, rental rates in BKC region may see an upward revision. In the listed space, Sunteck Realty owns two commercial assets at BKC yielding ~₹ 300 psf per month rental.

There is renewed interest in fund raising from primary markets in the real estate sector with DRHPs getting filed by Pranav Constructions (₹ 392 fresh issue plus offer for sale), Blackstone backed largest REIT (₹ 6200 crore issue), Lotus Developers and realty (₹ 792 crores), and Neelkanth Realtors (1.35 million shares).

Realty stocks have corrected on an average 20-30% from the peaks over the trailing six months led by fears of steep correction in broader markets weighing on future luxury/super luxury property sales and weak launches in Q3FY2025. However, we believe with Q4FY25 expected to be a launch heavy quarter for the sector, the pre-sales momentum is expected to stay. The current correction has led to the valuation of stocks near or discount to NAVs wiping off the premium assigned for new business developments. Hence, we consider this an opportunity to buy quality realty stocks such as DLF, Oberoi realty, Phoenix Mills and Max Estates.