S&P BSE Realty Index has risen sharply by ~67% year-to-date in CY23 as concerns over rising mortgage rates impacting demand have been addressed by all companies under our coverage which clocked record residential sales bookings in FY23 (up 43% YoY in value terms) and momentum sustained in H1 FY24 in spite of the absence of big-ticket launches by most developers.
All coverage companies have a large launch pipeline for festive season and H2 FY24 (September 2023-March 2024).
Hence, we estimate pan Indian residential market share for our coverage to grow from 24% in FY23 to 28% in FY25E led by sales booking compound annual growth rate of 13.8% over FY23-25E.
With developers following pricing discipline and aligning price increases in line with inflation/salary hikes (5-7%) while reining in debt levels, any downward revision in mortgage rates may boost demand further.
Notwithstanding the sharp rally in stocks, we remain constructive on residential space over FY24-25E.
Top picks: DLF, Brigade Enterprises.