2 real estate stocks to buy as valuation turns attractive from medium term perspective 

Nuvama Institutional Equities in its latest note said real estate stocks are attractive from a medium-term perspective in light of rising RERA-driven consolidation. With investors increasingly gaining confidence about housing sales trajectory, the brokerage believes the odds for the next leg of re-rating are high for developers with sizeable land banks. The brokerage has Prestige Estates Projects Ltd and Brigade Enterprises Ltd as its top picks in the housing space.

Nuvama said the ongoing premiumisation trend in India’s property space implies that volume-value trends have diverged sharply. By volume, supply and demand in the top-7 cities fell 53 per cent YoY and 7 per cent YoY in November 2024, respectively. By value, however, while supply dipped 44 per cent YoY, demand rose 16 per cent YoY. The year-to-date supply and demand (by value) increased 9 per cent and 13 per cent YoY, respectively. Unsold inventory by value rose 5 per cent YoY, but inventory months edged down YoY to 16 from 17 months in October 2024. 
 
"Strong launch pipelines in H2FY25, increased focus on business development and potential rate cuts should boost sales going ahead. Prestige Estates and Brigade (each ‘BUY’) remain our top picks," Nuvama said.

On a YoY basis, sales zoomed 151 per cent YoY in the NCR followed by Chennai and Kolkata; however, it dipped in Hyderabad. Year-to-date, sales value is up in all cities (up 13 per cent YoY), except Hyderabad. The NCR is again taking the lead (up 68 per cent YoY), followed by 12–15 per cent YoY each in Kolkata, the MMR and Bengaluru. Premiumisation is playing out in the industry, evident from the 7 per cent YoY dip in sales volumes in top-7 cities in November, Nuvama said.

"Over the medium to long term, we anticipate consolidation in favour of organised developers to gather steam. Moreover, rising capital intensity in the realty business, credit crunch and focus on execution are likely to aid developers with strong balance sheets and established brands," Nuvama said.

Developers, it said, have ramped up their business development activity, leading to the strengthening of launch pipelines and spurred pre-sales growth.

"Organised developers’ cash flow has been improving post-covid, which shall help them gain market share. Developers with robust balance sheets shall also benefit from attractive business development opportunities. Overall, we reckon stronger players would gain market share going ahead," it said.