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he real estate sector remains firmly in an upcycle, currently in its third or fourth year. While larger players are now contending with a high base effect, they are still expected to deliver strong year-on-year growth given their scale. Meanwhile, smaller developers are targeting 20–30% pre-sales growth over the next two to three years. According to Ronald Siyoni, ICICI Securities, overall, the momentum is expected to continue for at least another two to three years before the sector potentially enters a plateau phase.

ET Now: The view in the market generally is that the inventory backlog which historically has plagued the sector now seems to be fading away. Is that true?

Ronald Siyoni:

So, yes, the inventory backlog has been fading away and we have seen the data for quarter one like Anarock data also has been in the media that there has been dip in the housing sales. But yes, few segments are there like affordable category has been underperforming since covid because of high interest rates, but the listed space actually in the real estate, there is listed developers have moved away from the affordable segment quite few years back and they cater to the more upper middle income or say luxury to premium segments. What we have been seeing during Q1 till date is that they have got a phenomenal response from the projects which they have launched. If we see the Oberoi’s Goregaon launch or we see DLF's NCR launch of Privana North, even Godrej Properties, during quarter one, has sold good enough. So, quarter one for these real estate companies for larger players looks very promising and comparing the YoY growth, they should be having a good growth for quarter one as well. So, specific launches, bigger launches in the specific categories are performing very well despite the overall sluggishness, which has been there in the affordable or say lower mid-income category of housing.

ET Now: But some experts do believe that we are still in that up cycle for real estate which lasts long for almost a decade. Yes, it started post covid. So, help us understand that how far are we in this real estate upcycle and do you believe that it is still there for the Indian markets?

Ronald Siyoni:

Yes, very true. So, we are in the third to fourth year in the upcycle of the real estate sector, and now we are seeing high base little bit catching up for larger players to growYoY is a very strong growth expectation considering their size. And the smaller players in the real estate space are eyeing still 20% to 30% pre-sales growth for at least the next two to three years. So, still, we are in the upcycle. There are still at least two to three years to go before we hit a plateau and see a probability of a declining trend. But right now, we are in the upcycle as of now.

ET Now: What would your stock-specific recommendations be from the real estate space, because if you take a look at the quarter gone by and the earnings that we have seen, some companies have very largely outperformed. On the flip side, at the other end of the spectrum, some companies are very largely underperformed. How should one approach the real estate space right now in terms of investment?

Ronald Siyoni:

So, rightly said that a few companies have drastically outperformed and a few have missed. But we have been structurally positive on the real estate sector, and selectively we prefer a few companies like DLF. We prefer in the largecap space DLF, Oberoi Realty, Phoenix Mills, these are all largecap names. In the midcap space, we prefer Arvind SmartSpaces, Max Realty, then Aditya Birla Real Estate. So these are in the midcap space, and we like the real estate sector. We see that this year the performance should be good, and the start for the larger players has been very good. In H2, there are many launches to be done and high ticket size launches and big projects are expected to be launched during quarter three and quarter four of this fiscal year and there which should give further momentum. So, these are the overall picks in the real estate space.