JP Morgan Bullish On Indian Realty Sector
JP Morgan believes that the India residential cycle is turning up with buyer sentiment turning positive on the back of all-time-low mortgage rates and the impact of COVID-19, which seems to be forcing households to look at financial safety and better home quality. As per them, Q3 presales have likely been strong across space. They expect 2H21 sales to compensate for losses in the first five months and expect stronger growth in FY22.
They add within the sector, consolidation towards listed developers is likely to continue given better balance sheets and execution. As per JPM, with markets are now looking at growth and balance sheets across the sector largely cleaned up, they believe that the key stock driver has shifted to sales booking growth from net debt/cash generation.
As long as companies report positive sales growth, they believe stocks will continue to do well. This has been seen in the case of Godrej Properties and DLF, where stock prices over the past two years have moved in tandem with the direction of presales. The company expects presales print to be key stock driver over net debt and the balance sheet quality of listed developers likely to be main consolidation driver.