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« Mumbai and Delhi Good for Real Estate Investment- Asia Pacific Report | Home | MGM Mirage to launch Luxury Hotel Brands in India »

India’s Real Estate Recovery to Drive Stocks- BofA Merrill Lynch Global Research

A recovery in Indian commercial property and rising home prices in Mumbai and New Delhi will boost asset values and drive real estate stocks next year, BofA Merrill Lynch Global Research said. The brokerage was reinstating coverage of the nation’s property industry with a “bullish” stance and has a “buy” recommendation for Indiabulls Real Estate Ltd., DLF Ltd. and Housing Development & Infrastructure Ltd., BofA Merrill Lynch analysts Unmesh Sharma and Gagan Agarwal said in report today. They have a “neutral” recommendation for Unitech Ltd., the second-biggest developer.

“Real estate stocks have experienced a sharp rally since March 2009 on the back of capital raising and increased sales volume in the residential segment,” the analysts wrote. “We expect commercial property and pricing to surprise positively, leading to the next round of significant net asset value upgrades.” Housing Development, the nation’s third-largest developer by value, has more than doubled in Mumbai trading this year, leading gains among the largest property stocks. The benchmark Sensitive Index, also known as the Sensex, has risen 80 percent, poised for its best annual performance since 1991. The commercial property market may only see the benefits from an increase in hiring in six months, according to today’s report. Investors are also “overly concerned” about oversupply as only 50 percent to 60 percent of commercial space being developed will be delivered on time, the brokerage said, citing trends over the past four years.

Office rents in Mumbai, home to India’s main stock exchanges, were the seventh most expensive worldwide this year, according to a survey by CB Richard Ellis Group Inc. A recovery in economic growth may also help support higher residential values, BofA Merrill Lynch said. Home prices in Mumbai, New Delhi and adjoining areas known as the National Capital Region may gain as much as 15 percent next year. Chakravarthy Rangarajan, the prime minister’s top economic adviser, said last week the economy may grow 7 percent in the year through March 2010, more than an October prediction of 6.5 percent.

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