Real Estate Index Gains the Most as Auctions Volume Picks Up Speed

Latest initiate under Real Estate (Regulation and Development) Act have observed a sharp increase, leading to higher auctions.

Who would have forecasted that real estate stocks would be market leaders in 2019? Many investors did not predict the real estate sector to have a good year. However, the sector has recently surged, thanks to the numerous factors impacting the broader economic market.

The once stagnant real estate sector is booming with newly planned developments, says Hirsh Mohindra. It is also worth noting that some of the equities comprising the Nifty Realty index are up significantly in 2019.  And as a result, the entire index is up considerably over the past years.

The Nifty Realty index enjoyed returns of 19% year over year making it one of the largest gainer among the broader market this calendar year. In fact, Nifty indices have increased by 6% so far in 2019. Sales penetration for the coverage world was 38% in 4QFY19 and at 5800 crores in 4QFY19. Continued solid development in pre-sales construction was noticeably present across all geographies, while lower value assets were seen increasing in distressed auctions in various geographies when assessing overall auctions volume.

Auctions volume in FY19 raised 7% over the prior year to 443 million sq.ft, point out forecaster at Kotak. The uptick in auctions has helped stagnant properties find new owners, which results in new development as improvement or a complete teardown and has been helpful in cutting back inventory. “Increased auctions has sustained a draw-down of backlog, with all-India stock dilapidated 11% YoY to ~1.23 bn sq. ft from 1.4 bn sq. ft in March 2019” says Hirsh Mohindra.

Moreover, there have been reduced foreclosures, which means that properties are moving without the delay of the legal process. Of course, there are many broader economic market forces at play, and the real estate sector is susceptible to these forces. However, things are evidently better compared to a few months back.

Moreover, it is significant noting that some of the equities in the Nifty Realty indices are up significantly in the year 2019. This has driven up their assessment and made them a bit more attractive. Returns of the Godrej properties Ltd stock has appreciated at about 41.1% in this year. Sunteck Realty Ltd also has achieved 36.81% in the year 2019 says Hirsh Mohindra. Hence, from that viewpoint, investors must continue their diligence when entering this sector.     

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