Real estate companies’ shares extended gains on Thursday on hopes of strong demand and lower interest rates ahead of the festive season. The jump in the realty basket comes at a time when many lenders have already announced reduction in their home loan interest rates, which, according to experts, is triggering demand in the residential housing market.

While Godrej Properties, DLF, Hemisphere Properties and Oberoi Realty shares closed 7.9-13.5 percent higher, Phenix Mills gained 1.1 percent. The Nifty Realty index surged 8.7 percent, closing higher for the fifth session in a row.

On Wednesday, the realty index had zoomed 8.6 percent to a high of 455.10, sharply outperforming the headline Nifty50 index which was flat.

Earlier that day, Godrej Properties said it achieved sales of Rs 575 crore in a single day at the launch of the second phase of its Godrej Woods project in Noida. In the past six months, the Mumbai-based developer had sold inventory worth Rs 1,140 crore in the project.

“Festive season 2021 will set a new benchmark in customer-orientation where the entire industry will pull together to harness latent demand for homes. This year, we are likely to see significantly improved traction in the housing segment during this period," said Anuj Puri, Chairman of property consultant ANAROCK Group.

According to Puri, lenders are in intense competition with each other to gain a larger market share among home loan borrowers in this critical time.

“As always, competition is good for the market, and especially good for consumers. The current period has been correctly in identified as one of unprecedented opportunity, where high demand and low property rates coincide,” he said.

In a survey conducted by global financial services firm UBS, 56 percent of the respondents want to buy a property over the next two years and three in four expect the prices to rise in the next few years.

A pain point has been that under-construction demand is back, the survey found.

UBS said it is positive on the real estate cycle but valuations are making it selective. The brokerage has 'buy' ratings on DLF and Prestige Estate, and 'sell' calls on Godrej Properties and Oberoi Realty.

Meanwhile, Investec has initiated coverage on Macrotech Developers (formerly known as Lodha Developers) and is positive on the stock. According to the brokerage, the sector appears to be at the cusp of a long cyclical uptrend as far as sales are concerned. It believes that Lodha is best positioned to play the cycle because of its higher market share in the Mumbai Metropolitan Region (MMR) market.

With most capex now behind, Lodha is deleveraging its balance sheet, said Investec, which is also positive on the realty developer for its lower valuations.