Inventory across most companies down to below 12 months

Real estate will continue to reap the benefits of an ongoing demand momentum and grow between 5-10% in 2023, says brokerage firm Motilal Oswal.

“With interest rate unlikely to be a dampener on demand from hereon, we expect absorptions for top-8 cities that have remained flat since last five quarters to come back on growth track,” it said while listing Lodha, Prestige and Godrej as its top sectoral picks.

It also highlighted the fact that residential absorption has sustained at a quarterly run-rate of over 80,000 units for top-8 cities over the past five quarters despite an over 200-basis point rise in lending rates.

Economists at the firm are of the view that the RBI might go for a rate cut in future.

“With a surprise pause in rate hike by the RBI in its April 2023 policy meeting, our economist believes that the probability of any further rate hikes is minimal and we might even witness a rate cut from late-CY23. Thus, interest rate hikes are unlikely to be a dampener from hereon,” Motilal Oswal said.

According to the report, inventories across most of the companies declined to below 12 months as absorptions exceeded launches over the past 6 quarters.

“We expect launches for our coverage universe to pick-up in 4QFY23 to a multi-quarter high leading to 42% YoY growth in pre-sales,” said the Mumbai-headquartered firm.

“As demand momentum continues to sustain, we expect launches for our coverage to pick-up from 4QFY23 and reach a multi-quarter high of 18 million square foot (msf),” it added.

While predicting that the industry will continue to witness gradual price hikes, the brokerage firm reiterated its constructive outlook on the industry.

“Since affordability has sustained at healthy levels and inventory overhang still remains at a comfortable range, we expect gradual price hikes to continue. Hence, we reiterate our constructive outlook on the sector. We prefer Macrotech Developers (Lodha), Prestige Estates Projects and Godrej Properties within our coverage universe,” it said.