From Sobha To DLF, Kotak's Arsiwalla Advises Investors To Follow 'Basket Approach' For Real Estate
Investors looking to bet on the real estate sector should consider a group of potential winners rather than individual companies as demand spikes, according to Murtuza Arsiwalla of Kotak Institutional Securities.
Bengaluru's Sobha Ltd. and Prestige Estate Projects Ltd.; Mumbai's Lodha Group (Macrotech Developers Ltd.), Godrej Properties Ltd., and Oberoi Realty Ltd.; and Delhi's DLF Ltd. are among the largest players in their micro markets but it's hard to tell who's going to capitalise on the increased market share opportunity, Arsiwalla, director at Kotak Institutional Securities, told BloombergQuint's Niraj Shah in an interview.
However, such large players, with access to capital, have consumer trust and will benefit.
Kotak's recommendation is to play the real estate theme through the "basket approach rather than the company approach", Arsiwalla said. "It's now based on which management will capitalise on the opportunity. Go with the leaders, bank with a basket and hopefully two or three out of the five will do fantastically well."
Demand for homes, measured by property registrations, has jumped as record-low interest rates, incentives and need for bigger homes to meet work-from-home requirements brought back buyers. That has fuelled a rally in real estate stocks. The Nifty Realty index has surged nearly 63% so far this year compared to the Nifty's 26.5% advance.
The consolidation in the real estate sector has suddenly found acceptance with the investor fraternity, Arsiwalla said. "That's the biggest change that has come about with investing in real estate stocks."
Still, there are several large corporates who could be the dark horses of the real estate sector, according to Arsiwalla. "Having a large corporate identity, access to capital and consumer trust will help them gain market share as a new entrant," he said. "There are at least a handful of companies which are trying to re-energise and refocus on real estate as a vertical by banking on their group presence."
Watch the full conversation here: