List of Top Real Estate Sector Stocks in India: Like so many other sectors the real estate sector remains one of the worst-hit during COVID-19. Since the Pandemic broke out, the sector has incurred a loss of over Rs 1 Lakh Crore, According to a report from KPMG. However, With the gradual unlocking of the economy, there has also been a transformation in the sector.
The Indian real estate sector has witnessed high growth in recent times. This was fueled by the rise in demand for office and residential spaces all over the country. As investors provide a fresher outlook towards this sector we too try to cover it in this article. Here we will look at the real estate sector stocks to watch in 2022 and also analyse the industry as a whole. Keep reading to find out.
Table of Contents
Indian Real Estate Sector Overview
The real estate sector is second only to agriculture in terms of employment generation and contributes heavily towards the gross domestic product (GDP). Around five per cent of the country’s GDP is contributed to by the housing sector.
The real estate sector is one of the most globally recognized sectors. It comprises four sub-sectors- residential, retail, hospitality & commercial. Almost 80 per cent of real estate developed in India is residential space, the rest comprising of offices, shopping malls, hotels and hospitals.
Foreign investor, in particular, seems to have a positive outlook towards this sector as well. This is evident from the growing flow of FDI into the Indian real estate sector. This is a result of widespread optimism among the Non-Resident Indians (NRI). This would further drive up their investment in the sector.
To increase more participation, The Securities and Exchange Board of India (SEBI) has given its approval for Real Estate Investment Trusts (REIT). REIT is a special type of company that either owns or finances income-producing properties. It is a platform that will allow all kinds of investors to invest in the Indian real estate market. It would further create an opportunity worth Rs. 1.25 trillion (US$ 19.65 billion) in the Indian market in the coming years.
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5 Real Estate Sector Stocks to Watch in 2022
Here is the list of best real estate sector stocks to invest in 2022. They include:
1. DLF Limited.
It is a leading real estate company that was founded in 1946 and currently has a market worth of Rs. 85,682 Crore. This company has created the most significant and well-renowned real estate projects in different corners of the nation. This is one of the best real estate stocks to invest in.
The company has a unique business model with earnings arising from development and rentals. DLF has forayed into infrastructure, SEZ and hotel businesses. The company received a revision in its rating to AA- by ICRA, recently. It came as the operating performance of the company has improved.
DLF posted a profit of Rs 843 Cr in FY22 which is almost the double of net profit the year before. The plus point is that this is a dividend-paying company with a yield of 0.87%. The promoters holding in the DLF has remained unchanged this year with zero promoters pledge. The market leader has a debt to equity ratio of 0.11 which is relatively low. The Return on Capital Employed (ROCE) is 4.78%. The price to earnings ratio (P/E) of the sector is 32.65. This implies that the company is overvalued as it has a ratio of 57.12.
2. Godrej Properties
Godrej Properties has been a reliable real estate agency since 1990. It is a subsidiary of Godrej Industries Ltd., which increases its creditability multiple-folds. Monetization of older commercial projects remains one of the core focus areas of the company.
The company has completed some of the most prominent residential, commercial, and township projects in the major states of India. It recently entered into a joint venture with the TDI group to build a luxury housing project in Delhi. The company has the second highest market capitalization in the industry with a value of Rs 36,210 Cr.
Although the company posted a net loss last year, it managed to give a huge profits of Rs. 539 Cr in FY22. This made the P/E ratio of the company is to be 102.81 which was negtive last year. The promoters of the company have also reduced their stake in the company by 0.01% to 58.43%. The promoters pledge is zero for this company as well. The company has a return of capital employed ratio of 8.91% which is the lowest among its competitors.
3. Oberoi Realty
Incorporated in 1980, Oberoi Realty Ltd. is a Mumbai-based real estate company that has revolutionized the residential real estate game in the nation. It has some significant projects lined up for the future that is expected to bring great news for shareholders.
The market capitalization of this real estate company stands at Rs 29,889 Crore. The promoter pledge is zero. The company is available at a cheaper rate as the P/E ratio is 28.54. The debt to equity ratio is also low as compared to its competitors at 0.27. The investors got an average return of 10% which is higher than their peers.
The company earned a profit of Rs 807 Crores showing a growth of 9.6% on a yearly basis. The promoters holdings remain unchanged during the year.
4. Prestige Estate
Prestige Estates Projects Ltd. was established in 1997 and is one of the most famous names in the real estate business. It has built top-class residential, official, retail, and hospitality projects in India. The company is available at a relatively lower valuation as the
This dividend-paying company has a market capitalization of Rs 17,237 Crore with a dividend yield of 0.35. It has plans to expand its warehousing portfolio as it acquired multiple lands in and around Bengaluru.
The company booked the highest sales booking revenue in FY21 which made a total of Rs 1584.3 Crores. In FY21, Prestige earned a net profit of Rs 1577 Cr in FY2 which is a 190% increase from FY20. However, the net profits of the company have reduced to Rs. 1231 Cr by 21%. The promoter holding remained unchanged this year with 65.48%. The company has a return on capital of 8.74% and a low debt to equity ratio of 0.72.
Also read: Real Estate vs Stock Market Investment – Which One is Better?
5. Phoenix Mills Limited
Phoenix Mills Ltd is engaged in the property development business. The company is one of the most prominent retail mall developers and operators. It has created the eight largest malls in the six major cities of India and is working aggressively towards building some more.
They have entered into a strategic alliance with Pantaloon group which owns major brands like Pantaloon. Recently, CRISIL revised its rating for the company from Negative to Stable with A+. The market capitalization of Phoenix mills is Rs 22,567 Cr.
It is a dividend-paying company with a yield of 0.19. The company has earned net profit of Rs 247 Cr in FY22 after a massive decline in the net profit in the FY21. The holding in the company by the promoters has increased by 1.82% and is at 47.33% in FY22. The promoters pledge remains at zero. The company can be considered overvalued in the current market with a P/E ratio of 95.25. The company has a return on capital employed at 5.06%. The debt to equity ratio has reduced to 0.60 in FY22.
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Complete list of stocks in real estate sector
| Companies | Market Cap (Rs in Cr) |
|---|---|
| DLF | 85,682 |
| Godrej Properties | 36,210 |
| Oberoi Realty | 29,889 |
| Prestige Estate | 17,237 |
| Phoenix Mills | 22,567 |
| Brigade Enterprise | 10,419 |
| Sobha | 6,334 |
| Housing & Urban Development Corporation Ltd. | 7,196 |
| Indiabulls RE | 3,520 |
| PNC Infratech Ltd. | 6,222 |
| Delta Corp Ltd. | 4,836 |
| Sunteck Realty | 7,425 |
| Nesco | 4,031 |
In conclusion
The new variant of Covid- Omicron has raised concerns across the world. Experts are worried about how it could impact the real estate sector. Some suggest that this could lead to a continuation of the housing trends as it may lead to some people returning to work-from-home mode. The best bet is to wait and see how the events turn out.
Having said that, the real estate sector in India is expected to reach US$ 1 trillion by 2030. By 2025, it will contribute 13% to the country’s GDP. Retail, hospitality, and commercial real estate are growing significantly and are providing the infrastructure for the country’s needs.
That’s all for this article on real estate sector stocks to watch in 2022. Let us know your thoughts in the comments below!
Happy Investing!
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