Godrej Properties, Lodha, DLF: Jefferies' Top Picks In Realty Stocks

Jefferies Equity Research has reaffirmed its preference for three 'buy' rated real estate developer stocks—Godrej Properties Ltd., Macrotech Developers Ltd. (Lodha), and DLF Ltd. They remain top picks in the Indian real estate market due to their strong launch pipeline and market positioning, the note said.

The brokerage projects these developers will drive significant growth in pre-sales for fiscal 2025, supported by an uptick in festive season sales and new launches in the second half of the year.

Jefferies highlighted key launches lined up for the remainder of the fiscal, as state elections in Maharashtra and Haryana concluded:

• Godrej Properties: New towers in Mumbai (Kandivali, Wadala, Panvel), and new projects in Gurgaon, Bengaluru, Hyderabad, and Pune are planned. It has a 'buy' rating with a target price of Rs 3,750, according to Bloomberg data.

• Lodha: Premium inventory at Palava will debut in December, with prices about 50% higher than previous launches. It has a 'buy' rating with a target price of Rs 1,530.

• DLF: Launched the Dahlia Phase V project in October, and plans to launch Privana Phase III early in the fourth quarter of the fiscal. It has a 'buy' rating with a target price of Rs 1,000.

• Prestige Estates: Significant launches are anticipated, including Prestige City in NCR, Southern Star in Bengaluru, and Nautilus in Mumbai.

• Oberoi Realty: Launched the Garden City project in Thane in October, receiving a strong market response.

Residential property sales saw a resurgence in October, with activity reaching a six-month high, according to Jefferies' analysis of Propequity data. The festive season pushed sales and launches up by 30% and 25%, respectively, compared to the three-month moving average. While sales volumes in the top seven cities were flat year-on-year, sales value surged over 20%, driven by higher pricing.

Mumbai led the growth, with property registrations in October rising 22% year-on-year, marking an eight-month high.

Inventory levels across the top seven cities remain at near 14-year lows, supporting a double-digit increase in prices. While markets like Mumbai and Pune saw inventory levels decline due to slower approvals, Bengaluru reported an 18-month high in inventory levels, despite steady demand. Over the past six months, average prices rose by 5% in Bengaluru, 3% in Mumbai, and 2% in NCR.

Jefferies noted that the top 10 listed developers are on track to meet guidance, with pre-sales value growing 21% year-on-year in the first half of the fiscal. The firm expects pre-sales growth to reach approximately 25% for the full fiscal, as developers leverage the festive season's momentum.

The realty index has recovered about half of the 19% decline recorded between June and November 2024. Developers covered by Jefferies are trading at an average price-to-earnings ratio of 19 times, making them attractive investments amid strong launch activity and rising sales.