Despite a marginal recovery in the premium real estate segment in Gurugram and in pockets of Mumbai, the overall sentiment still remained muted in 2019.

According to realty consultant Knight Frank's half-yearly report published this week, sales in the sector grew 1 percent despite economic slowdown.

NIFTY Realty index delivered a 21 percent returns over the last three months, largely driven by DLF, which has given 58 percent return in this period.

Even as residential markets

remained muted, cap rate compression, which indicates rate of return that is expected to be generated from a property, has started reflecting in stock prices, said Parikshit D Kandpal, analyst at HDFC Securities.

Kandpal added: “Among our coverage universe we expect Prestige Estate Projects, Sobha, Kolte Patil to deliver strong financial results whereas DLF, Oberoi Realty, Brigade Enterprises are expected to deliver average financial performance. We have rolled over our NAV valuation estimate to Dec-20E. The change in target prices is highlighted in the following pages.”

“During 3QFY20E, our coverage universe aggregate revenue/EBIDTA/APAT is estimated to grow 9.3/0.1/11.6 percent YoY.”

Real estate stocks' target price

HDFC Securities recommended BUY on DLF, Sobha and Kolte Patil. On the other hand, the brokerage has maintained ‘Netral’ on Brigade Enterprises, Prestige Estates and Oberoi Realty.

Real estate stocks peer comparison

Negatives for the real estate sector:

Property prices still remained elevated, restricting volume-led demand. NBFC funding and liquidity are still constrained and balance-sheet deleveraging is not yet visible.

For organised players, government’s resolve to revive stuck projects may slacken market share consolidation towards organised players.

Positives for the real estate sector:

On the back of government measures to revive real estate, buying sentiment is improving, which may drive overall demand over the next few quarters. Commercial leasing remained robust and vacancy is reducing. Planned fundraising by developers over the next one year will result in deleveraging.

First Published:Jan 9, 2020 1:42 PM IST