One global crisis to another. This probably sums up the story of the real estate sector in India. It was the global financial crisis of 2008, which hit the real estate sector very badly. It was the global covid crisis, which got it out from the dumps. Excess inventory, over leveraged balance sheets and weak demand were some of the factors which plagued the sector till 2020. Post that period, excess liquidity, the need to have a bigger house, companies having learnt lessons about what not to do when time is good probably defines the listed real estate sector in India.
"We are already in the midst of a good investment cycle unfolding in India supported by a strong post-Covid demand resurgence that has taken capacity utilization levels to new highs. With bank and corporate balance sheets now in relatively better shape, we think this cycle can maintain strength," says Taher Badshah.
“All the auto names have done very well. Against that backdrop, companies which have a sound EV backbone and EV plants like Tata, TVS Motors, M&M to an extent stand out but it is more a sum of parts story. Both TVS Motors, Tata Motors look good. There is enough fundamental run-up left in the stocks.”
According to Chakri Lokapriya of TCG AMC, rural consumption and tractor sales are weak, so rural spending is unlikely to pick up in the next quarter. He also mentioned that FMCG stocks are expensive and not worth investing in. However, the hotel sector is expected to do well due to strong demand from the World Cup, holidays, festival season, and wedding season. In the real estate sector, Sobha and Lodha are favored. As for smaller private banks, they have mixed performances and specific issues, while PSU banks offer more opportunities.
One sector which did not recover from the shock of the global financial crisis for more than a decade was the real estate sector. Excess inventory, over leveraged balance sheets and weak demand were some of the factors which plagued the sector. Although the process has been slow, it took almost a decade but there has been a clean up in the sector. Regulatory changes like bringing in RERA and banks getting aggressive in recovering dues from builders and also judicial intervention had an impact on the working of the industry.