'Property Market Has Multiple Tailwinds' — UBS Initiates Coverage On DLF, Oberoi Realty And More
Share prices of DLF Ltd., Prestige Estates Projects Ltd., and Oberoi Realty Ltd. were all trading around 2% up in early trade post the development.
UBS has initiated coverage of India's property market, projecting a promising trajectory for the sector. The brokerage has issued 'buy' ratings for Prestige Estates Projects Ltd. and DLF Ltd., citing their strong execution capabilities, geographic diversification, and healthy balance sheets.
In its latest research report titled "Sustainable Upcycle Driven by Multiple Tailwinds," UBS highlighted multiple factors expected to sustain the ongoing real estate boom for the next three to five years.
The Indian residential market is set to grow with a forecasted compound annual growth rate of 15% in pre-sales from fiscals 2024 to 2029.
UBS has attributed the optimism to multiple tailwinds:
Low Inventory Overhang: Inventory levels are at their lowest in 15 years.
Strong Affordability: Despite price increases, affordability remains at its best since 2010.
Regulatory Reforms: Policies like RERA have boosted transparency and buyer confidence.
Favorable Demographics: Urbanisation, rising affluence, and nuclear family trends are creating steady demand.
Rating And Target Price Of Top Realty Stocks
UBS has issued a target price of Rs 1,005 on DLF stock, indicating a 19% potential upside. The firm has given a target price of Rs 2,175 for Prestige Estates, implying an upside of 26%. Oberoi Realty received a 'neutral' rating due to limited valuation upside. Target price for Oberoi Realty was Rs 2,230 apiece, indicating a 9% upside.
Valuation metrics suggest room for growth as per the report, with Prestige and DLF trading below peak multiples seen in other global markets during similar cycles.
Road Ahead And Some Challenges
The commercial real estate segment has rebounded from Covid-19 disruptions, claims UBS. With work-from-office trends resurging and global capability centers expanding, UBS predicted a robust 26% CAGR in topline growth for financial years 2024 to 2029. Developers with strong balance sheets are well-positioned to benefit from this high-margin segment, as per the report.
While UBS acknowledged potential near-term softness due to macroeconomic conditions, it advises investors to view such dips as buying opportunities. The report also emphasised the importance of consolidating gains made through regulatory reforms to ensure sustained growth.
