DLF (DLF.NS), Prestige (PRESTIGE.NS), and Brigade (BRIGADE.NS) Emerge as Top Real Estate Stock Picks: Nuvama Insights

<ul>
  <li>Housing demand in India’s top 7 cities improved 28% year-on-year (YoY) in April 2024, while it increased 17% YoY in 2024 so far.</li>
  <li>However, new launches plummeted 10% YoY and supply dipped 15% YoY.</li>
  <li>Unsold inventory continued to improve as it declined 7% YoY with inventory months falling to 15 in April from 19 in the same month last year.</li>
</ul>
<p><strong>Real estate stocks seem attractive amid rising consolidation, healthy demand; DLF, Prestige, Brigade top picks: Nuvama</strong></p>
<h2><strong>Housing Demand Shows Significant Improvement</strong></h2>
<p>Housing demand in India’s top 7 cities saw a notable increase of 28% YoY in April 2024. This upward trend is also reflected in the year-to-date figures, which show a 17% YoY rise. Despite this positive development, new launches and supply have faced a downturn, with a 10% and 15% YoY decline, respectively.</p>
<h3><strong>Impact on Unsold Inventory and Prices</strong></h3>
<p>The reduction in unsold inventory has been a silver lining, decreasing by 7% YoY. This improvement has reduced inventory months from 19 in April last year to 15 this year. Consequently, the correction in unsold inventory levels has led to a surge in average home prices across all major cities.</p>
<h2><strong>RBI's Pause on Rate Hikes and Developer Strategies</strong></h2>
<p>With the Reserve Bank of India (RBI) pausing rate hikes, real estate developers have ramped up their business development activities. Nuvama Institutional Equities believes this will improve sales momentum, particularly for organized developers. The brokerage firm anticipates that the consolidation in favor of organized developers will gather steam over the medium to long term.</p>
<h3><strong>Financial Health and Market Opportunities</strong></h3>
<p>Organized developers are witnessing an improvement in their cash flow generation post-COVID, which is helping them gain market share. Developers with robust balance sheets are expected to benefit from attractive business development opportunities. Nuvama Equities argues that stronger players will gain market share moving forward.</p>
<h2><strong>Investment Opportunities in Realty Stocks</strong></h2>
<p>Despite liquidity constraints, the brokerage firm expects launches to remain contained. With valuations remaining comfortable on a relative basis, Nuvama Equities sees this as a good opportunity to enter realty stocks. The firm believes that realty stocks are attractive from a medium-term perspective, especially in light of rising consolidation and investor confidence in the housing sales trajectory.</p>
<h3><strong>Top Picks and Recommendations</strong></h3>
<p>Nuvama Equities has identified DLF, Prestige Estates Projects, and Brigade Enterprises as their top picks in the sector. The brokerage firm has a ‘Buy’ rating on these stocks, citing their strong balance sheets and established brands as key factors for their recommendation.</p>
<h3><strong>Conclusion</strong></h3>
<p>In summary, the real estate sector in India is showing promising signs of recovery and growth. With rising housing demand, improved cash flows for organized developers, and attractive investment opportunities in realty stocks, the sector is poised for a positive outlook. Investors are advised to consider the recommendations and insights provided by Nuvama Equities for informed decision-making.</p>