Indian real estate stocks bore the brunt of Monday’s market crash, as investors are concerned that a potential economic slowdown in the United States could reduce demand for real estate, causing a decline in property prices and rentals.
A slowdown in the US economy could lead to reduced capital flows into emerging markets like India. This reduction in capital flows could limit the availability of funds for real estate developers.
Additionally, today’s market crash presented an opportunity for investors to book profits in real estate stocks, which have been on a relentless winning streak since March 2023.
Nifty Realty at 2-month low
Amid this backdrop, the Nifty Realty index dropped 5.3% in today’s intraday trade, hitting a 2-month low of 981.95 points and extending its bearish trend for the fourth consecutive session. This decline marks the second-largest intraday drop in 2024 so far.
Among individual stocks, Godrej Properties led the losses with a 6.4% drop, followed by Brigade Enterprises at 5.6%, Sunteck Realty at 5.2%, while Phoenix Mills and Oberoi Realty fell by 5.10% and 5%, respectively.
Other stocks such as Macrotech Developers, DLF, Prestige Estates Projects, Sobha, and Mahindra Lifespace Developers also traded with losses ranging between 3.4% and 4.2%.
Despite the growth in the U.S. economy in the second quarter, concerns about a potential recession have arisen due to weak economic data, including slowed job growth, higher unemployment, and disappointing corporate earnings.
Besides recession concerns, the escalating tensions in the Middle East had also dampened investor sentiment. Analysts are concerned that Israel’s war against Palestinians in Gaza, which began last October following attacks on the Jewish state, could escalate into a wider conflict involving more nations.
The Indian residential segment has experienced significant structural changes over the last decade, resulting in a period of high performance. Despite facing multiple challenges such as demonetisation, the implementation of the Goods and Services Tax (GST), the non-banking financial companies (NBFCs) crisis, and the COVID-19 pandemic, the sector has continued to grow.
Today, the residential real estate market is reaching new heights, driven by strong policy interventions like RERA, which have increased transparency and customer-centricity. Additionally, robust economic momentum and a strong desire among people to own and upgrade homes have contributed to this growth.
In 2023, India’s residential real estate sector showed resilience with consistently strong demand. Property sales surged significantly compared to the previous year, and this trend has continued into the current year. According to Knight Frank, housing sales hit an 11-year high with 1.73 lakh units sold in the first half of this calendar year.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
