Realty stocks get a boost as experts see housing recovery by 2019-end

Realty stocks gained momentum on Tuesday, especially after global investment firm CLSA said it feels the housing revival is likely towards the end of 2019.

DLF, Godrej Properties, Sobha, Ajmera Realty, Brigade Enterprises, Indiabulls Real Estate, DB Realty, HDIL, HUDCO, Marathon Realty, Oberoi Realty, Prestige Estate, Puravankara, Sunteck Realty, etc all gained in trade on March 12.

The housing/realty sector has been struggled for a few years now, especially after implementation of demonetisation and RERA (Real Estate Regulation and Development).

Most analysts believe that the sector is gradually seeing some improvement partly due to the government policies, and revival may start in second half of this calendar year.

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CLSA said Gross Fixed Capital Formation (GFCF), the key measure of investment activities in the economy, declined from 34 percent of GDP in FY12 to 28 percent of GDP in FY17 and the housing market slowdown explains 60 percent of the GFCF decline.

The global investment firm believes GFCF has bottomed out now and is up 1 percentage point from the bottom. In fact, the housing unit sales have recovered from the post demonetisation lows, it said.

He further said housing market recovery is critical for a broad-based capex recovery. New housing sales increased 30-40 percent YoY during 2018.

CLSA said government's affordable housing program is working well and affordability should drive the eventual improvement by end-CY19.

GST rate cut is expected to boost consumer sentiment and reduce slow moving inventories, the research house said.

The Goods and Services Tax (GST) Council, on February 24, slashed tax rate on under-construction residential properties, effective April 1, 2019.

Hence CLSA's preferred housing plays are Godrej Properties, Sobha, HDFC and Astral Poly Technik.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.

(with inputs from CNBC-TV18) First Published on Mar 12, 2019 04:45 pm