The real estate sector is seeing a significant boost from the recent Budget 2024 announcements.
As per reported by the Business Today, Finance Minister Nirmala Sitharaman revealed measures to address the housing needs of urban poor and middle-class families, allocating Rs 10 lakh crore to urban housing over the next five years, with Rs 2.2 lakh crore from the central government.
A substantial portion of this budget will expand the Pradhan Mantri Awas Yojana (PMAY), aiming to add 3 crore more houses under the scheme. The urban allocation for PMAY for FY25 is Rs 30,170 crore, benefiting affordable and mid-income housing developers.
Real estate stocks saw an initial drop post-budget, but brokerage firms CLSA and Nuvama Institutional Equities remain optimistic about the sector’s future. They believe the government’s focus on affordable housing and urban development will drive positive momentum in the market.
Top Real Estate Picks
Brokerage firms have highlighted several real estate companies as top beneficiaries:
- Sobha Ltd.
- Godrej Properties
- Prestige Estates
- Brigade Enterprises
- DLF Ltd.
These companies are expected to gain from the increased budget allocation and potential interest rate cuts.
Nuvama Institutional Equities noted a decline in housing demand in India’s top seven cities by 41% month-over-month and 29% year-over-year in June 2024. However, demand in Q2CY24 increased by 7% year-over-year, while supply dipped by 5% year-over-year and 9% quarter-over-quarter. Overall demand for H1CY24 rose by 10% year-over-year, indicating potential growth ahead.
The government is encouraging states with high stamp duties on property registration to moderate these rates. Currently, cities such as Haryana and Chennai have a 7% stamp duty rate, while Mumbai and Pune have a 6% rate. Lowering these rates could make property purchases more affordable, stimulating the real estate market
There are plans to lower duties on house purchases by women, potentially increasing female participation in the property market and expanding the customer base.
The budget proposes the development of rental housing with dormitory-type accommodations for industrial workers through public-private partnerships with viability gap funding support. Developers likely to benefit include PSP Projects, Ahluwalia Contracts, NCC, and NBCC.
Sector Outlook
The number of months of unsold inventory improved from 19 in June 2023 to 15 in June 2024, indicating a reduction in unsold homes. This trend, combined with healthy leverage, a focus on business development, and potential rate cuts, is expected to sustain sales momentum, particularly for organized developers.
The potential for interest rate cuts, as suggested in the budget, could also positively impact the real estate market. Lower interest rates on home loans would make housing more affordable, boosting demand.
The budget includes a Rs 2.2 lakh crore initiative to make urban housing more affordable, supporting measures to ease housing costs in urban areas. This funding aims to benefit developers like Sobha, Prestige Estates, Sunteck Realty, and Godrej Properties.
Despite the positive outlook, challenges remain. Housing demand in India’s top seven cities fell sharply in June 2024, with a 41% month-over-month decline and a 29% year-over-year drop. However, the long-term outlook remains positive with increased demand in the first half of 2024.