Housing demand trend to stay intact, says Jefferies; downgrades Prestige, Sobha, upgrades Mindspace REIT

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Also Read: Delta Corp shares plunge 5% after weak Q3 FY24 earnings “Also, the government reintroducing the interest subvention scheme (guidelines likely in Feb24 budget) could provide a trigger. We expect some demand to shift to mid-end or affordable in 2024," Jefferies said in a report. The brokerage noted that inventory was at cycle lows at 17-months supply, which should keep pricing strong (10% gains) in 2024.

However, it believes disciplined price hikes are important for the residential cycle to continue, given low rental yields. This is because sharp price jumps drive end-users away as affordability declines and also lead to weaker quality supply. “It may also risk attracting regulatory action, with for example, RBI recently tightening consumer lending regulations a case in point.

We remain watchful," Jefferies said. (Exciting news! Mint is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest financial insights! Click here!) Meanwhile, the risk appetite among developers is finally rising, as they bet on market strength and potential consolidation. Strong cash flow generation is expected to persist thru 2024; though rising competition and higher pricing would raise scrutiny of land deal economics.

Jefferies said there is little room for error for developers. After a 127% Nifty Realty index rally since March 2023 lows, valuations for the real estate stocks are mostly at highest levels. “Strong growth and developer discipline is supportive; though high expectations leave little scope for disappointment.

Developers which are better placed on valuations viz. Godrej Properties and Sunteck Realty are the top large/mid-cap picks," Jefferies said. Also Read: Budget 2024-25: Three key