Looking for real estate players? Brokerages suggest these stocks to buy now

Analysts on Dalal Street are bullish on select real estate players, citing improving affordability, falling inventory levels and industry consolidation that will drive organised players going ahead. Amid the ongoing correction in the domestic equity market, the BSE Realty index has declined 22 per cent since November 9, 2021. Overall, the index is still up more than 150 per cent since the Covid lows, scaled in March 2020.
 
Edelweiss Securities believes that the pandemic and government sops to the realty space that followed in its wake provided a tailwind to the housing segment, catalysing the fence-sitters to finally take a plunge.

As a result, housing demand in 2021 shot up by 32 per cent year-on-year and organised developers managed to deliver strong sales growth. For the nine months ended December 31, 2021, companies that are part of the BSE Realty index reported 138 per cent year-on-year growth in consolidated profit on a 16 per cent rise in gross sales.

Net profit of Godrej Properties jumped 366 per cent to Rs 233.56 crore during April-December 2021 period. Likewise, the bottom line of DLF and Sobha advanced 183 per cent and 107, respectively, during the same period. Oberoi Realty, Prestige Estates and Sunteck Realty also reported 28 per cent, 36 per cent and 6.22 per cent YoY growth in net profit for the nine-month ended December 31.

Going ahead, Edelweiss Securities expects the launch trajectory to gather traction with major developers such as DLF, Godrej Properties, Prestige Estates, Macrotech Developers and Sobha looking to step up launches. "Our channel checks suggest Godrej Properties has either already launched or is in advanced stages of launching a total of seven-eight projects in Q4FY22," Edelweiss said.

The brokerage retained its bullish view on DLF and Sobha. On the other hand, it upgraded Godrej Properties from 'Hold' to 'Buy' considering its appealing valuation post-correction. Shares of Godrej Properties, DLF and Sobha have declined 36 per cent, 26 per cent and 20 per cent, respectively, since November 9, 2021. On the other hand, the benchmark BSE Sensex has retreated 5 per cent during the same period.
 
According to HDFC Securities, Covid-19 stood out as a big real estate disruptor and accelerated housing demand conversion. Some of the catalysts that fuelled this include stamp duty cuts, developer discounts, high attrition and resultant hikes, achievement of accelerated unicorn status and stock market rally.
 
"All-time low mortgage rates and all-time high affordability have provided the supporting environment. We perceive inflation as a key risk since it may drive input cost and mortgage rates higher and derail the recovery. We still believe that developers have headroom to absorb inflation as greater transparency over time has reduced costs of capital and organised developers enjoy 25-30 per cent lower funding costs than tier-2 players," HDFC Securities said in a report.

The brokerage has a 'Buy' call on DLF (Target price: Rs 486), Oberoi Realty (TP: Rs 1,143), Sobha (TP: Rs 1,000), Brigade Enterprises (TP: Rs 619), Kolte-Patil Developers (TP: Rs 381), Prestige Estates (TP: Rs 633), Phoenix Mills (TP: Rs 1,364) and Mahindra Lifespace (TP: Rs 473). It also upgraded Godrej Properties to 'Add' from 'Reduce' with a target price of Rs 1,804.