Realty sector rises 63%, outshining Nifty50; more firms eye IPOs

Real estate has been one of the best performing sectors and over the last one-year period it has given absolute returns of over 63 per cent, outperforming several other sectors as well as the benchmark Nifty50 that has appreciated by 27.5 per cent.

The real estate index includes  all the major developers, in its including Godrej Properties, Lodha, DLF, and Prestige Estates, all of whom are expanding to become pan-India players.

The shares of the companies have appreciated between  43 per cent and more than two times, such as Prestige Estates and Sobha stocks, which have doubled over the last one year. Stocks such as that of Oberoi Realty and Godrej Properties have risen over 70 per cent in the period under review, and Brigade Enterprises has risen over 90 per cent.

The rise comes on top of the appreciation that had already taken place since 2021, when the boom in the real estate sector really took off. The rally in stocks and the sector is a testament to the continuing demand, especially for housing, which is a major component of the sector.

While demand in the office sector has been mostly stable, the demand in the residential segment is more recent, dating from the pandemic. Coming off a near 10-year slowdown, residential demand is driving the sector.

The stocks of the second-tier developers have done even better, with Puravankara’s shares tripling in one year. Small players such as Ajmera Realty, Signature Global, and Max Estates have seen their shares appreciate 2.2-2.4 times.

While sales have seen blips and dips in some months, on a secular basis, both sales and launches by real estate developers have been on an upward trajectory and which fuelling  investor interest as well.

Real estate IPOs

The rally in the stock prices has also encouraged hitherto unlisted players to enter the markets, and in 2024 alone, there were seven real estate IPOs raising ₹13,550 crore, according to data by Colliers. This is a record number. In 2021, six real estate IPOs raised ₹10,840 crore.

The post pandemic demand is captured through the capital market trends. Since 2010, 47 real estate companies have entered the equity markets. More than half have listed since 2021, raising more than ₹30,000 crore.