Realty Sector India Investors `Love to Hate' Gets Deutsche Vote
Realty is among the worst-performing in India’s equity market this year, but its time to bet on them.
(Bloomberg) -- Property developers are among the worst-performing industry group in India’s equity market this year, but Deutsche Bank says it is time to bet on the big players.
There are early signs of recovery in the commercial and residential segments as the after-effects of policy measures that hurt demand are fading, Bijay Kumar, an analyst at Deutsche Equities India Pvt., wrote in a April 9 note.
While real estate stocks appear expensive in the near term, investors are not factoring a potential pick-up in momentum and the possibility of the industry being left with fewer players as laws aimed at introducing transparency and protecting consumer rights make it harder for smaller developers to survive.
“Indian real estate for long has been a sector investors loved to hate” because of uneven accounting and business practices, Kumar wrote. “The recent regulatory developments has revived hopes of a more organized and investor friendly developments in the sector.”
The market value of the 113 Indian property firms totals $25 billion, which “significantly underprices” the size of opportunity, Kumar wrote. A major home-loan company is worth 90 percent more than all real estate stocks, he said, without naming the mortgage lender.
Deutsche advises buying Godrej Properties Ltd. and Oberoi Realty Ltd., while recommending investors hold DLF Ltd. Godrej’s net income could rise 40 percent annually in three financial years through to March 2020, and Oberoi’s profit may surge 75 percent every year in the same period, Kumar wrote.
To contact the reporter on this story: Ameya Karve in Mumbai at akarve@bloomberg.net.
To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Ravil Shirodkar
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