Morgan Stanley's report on slipping down of real estate stock sinks investor's interest

The report of Morgan Stanley revealed that the pre-sales outlook for major developers such as DLF, Oberoi, and Prestige is expected to be slower and regarding that, investors are showing more interest in smaller developers.

The brokerage said that,among all the developers Godrej becomes the most preferred investment choice though there are concerns about its lower margins and cash flow.

Morgan Stanley notes that on an EV/EBITDA basis, both Prestige and Godrej, rated as "Overweight" (OW), appear relatively undervalued. This implies that despite prevailing uncertainties, these stocks could offer appealing investment opportunities.

In the latest report, JM Financial noted that, the inventory level is very low increasing disposable income, and limited supply expansion, the residential real estate sector is set to continue its upward trajectory.

During FY25, the brokerage company said that they are expecting the market growth of 18%, where volume growth of 12% and 6% escalation in prices and a moderate increase in supply.

The JM financial said in a statement, although supply is projected to increase steadily, inventory levels are expected to remain healthy due to strong absorption amid a robust demand environment. Furthermore, while cash flows are anticipated to rise significantly, developers are likely to focus on business expansion rather than on reducing debt.

Analysts at JMFL prefer developers known for timely launches and strategic business development. The brokerage has initiated coverage with a 'buy' rating for DLF, Keystone, Macrotech, and Sobha, and a 'hold' rating for Oberoi Realty. They highlighted DLF, Macrotech, and Keystone as their top picks.