Realty Bets

Investor sentiment in realty stocks have dampened as new home buyers are starting to feel the squeeze of high property prices and rising interest rates.

November and December have been slow months for residential sales in major markets. Commercial and retail leasing trends remain strong, but are extremely geography specific, Macquarie Securities said in its recent report.



In the past two months, BSE Realty index has shed 884.41 points or 23.64%.

As regards to commercial leasing, Macquarie in its report has noted that, ``Brokers expect 8-10 m sq ft of leasing in CY2011, just shy of the historical peak levels of 2006 and 2007. ``

Further, it notes that brokers are claiming that retail leasing enquiries have been up strongly, however adding that upcoming supply is a concern and these brokers note that 15 m sq ft of retail space can be made operational within the next 12-18 months.
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The brokerage house which prefers Bangalore residential, IT commercial and retail
property is betting on four stocks viz Prestige Constructions, Sobha Developers, Phoenix Mills, Housing Development and Infrastructure (HDIL), DLF.

Prestige Estate Projects:
Current Market Price: 161; Target price: 210; upside: 30%

Sobha Developers:
Current Market Price: 322; Target Price: 430; upside: 33%

Phoenix Mills:
Current Market Price: 223; Target Price: 270 ; upside: 21%

HDIL:
Current Market Price: 189; Target Price: 316; upside: 67%

DLF:
Current Market Price: 292; Target Price: 372; upside: 28%

Bottom line:

The rising food inflation (The overall inflation in November 2010 was 7.48%) has raised a concerned amongst investors especially as regards to interest rate sensitive sectors viz realty, auto and banking. While the interest rates were left unchanged in the Dec. 16, 2010 mid-term monetary policy review, the probability of a rate hike in the upcoming policy on Jan. 25, 2011 is high. While the brokerage house is bullish on these stocks, we would recommend that a neat stock picking has to be done keeping the scenario in mind.