RBI Monetary Policy: Sobha, Prestige, Godrej, DLF Can Benefit From Repo Rate Cut, Says CLSA
CLSA has highlighted several key beneficiaries of the anticipated repo rate cuts, following RBI's monetary policy meeting set to conclude on Friday. Prominent developers such as Sobha Ltd., Prestige Estate Projects Ltd., Godrej Properties Ltd., Sunteck Realty Ltd., and large rental players like DLF Ltd. and Phoenix Mills Ltd. are among the brokerage's top picks.
The affordable and mid-income housing segments, which have lagged behind luxury housing due to previous rate increases, are expected to see a significant uptick in demand, the brokerage noted.
CLSA forecasts a 25 basis point cut from the ongoing Monetary Policy Committee meeting, bringing the year-to-date cumulative rate cuts to 75 bps. Additionally, CLSA anticipates further cuts of 50-75 bps in the remainder of FY26, resulting in a total reduction of 125-150 bps over calendar year 2025 and the first half of calendar year 2026.
"The affordable and mid-income housing segments, which lagged luxury housing post 250 bps of rate increases over CY22-23, are likely to benefit from the reversal of the rate cycle," CLSA noted.
Key beneficiaries stand to benefit from lower interest rates on their debt and slight asset reflation, the note said.
The brokerage firm has upgraded Sobha to 'hold' from 'underperform'. "We raise our presales forecast for Sobha and lift its land bank value led by strong FY26 guidance. We lift our target price from Rs 1,150 to Rs 1,550 and upgrade from 'underperform' to 'hold'," CLSA stated.
The affordable and mid-income housing segments are expected to benefit from improved affordability due to reduced mortgage rates. "Post sharp rate increases of 250 bps over CY22-23, sales growth for the affordable and mid-income housing segment lagged luxury housing growth over CY23-24. This was largely due to the impact on affordability, especially for affordable and mid-income buyers, whose dependence on mortgages is high," CLSA explained.
REITs and large annuity-focused players are also set to gain from the rate cuts. "While debt levels for housing-focused players have reduced significantly post-Covid, rate cuts will not materially impact their financials. However, large annuity-focused players with relatively higher debt levels could see improved earnings due to lower repricing of debt," CLSA noted. Additionally, these players are likely to benefit from asset reflation, although the benefit should be more moderate as cap rates do not change by the same quantum as interest rates.
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