Realty will assume leadership in next few years: UBS Securities

ET Now caught up with Suresh Mahadevan, Head of Research, UBS Securities, to find out his outlook on the real estate sector.

You have always preferred residential stocks over commercial property. Do you still hold that recommendation of residential versus commercial because while residential property prices on ground are moving up, the stocks are not reflecting the same?

Real estate being a rate-sensitive sector has been hit a little bit because of the rising cycle. But, clearly, it is a sector that will assume a lot of leadership over the next few years. And you put in low household average, very low level of home ownership, young population, urbanisation into the equation, real estate has to do well residential over a period of time. So, it is more a structural call and less of a tactical call. We are going to stick with this for some time.

But you have a whole lot of papers coming in from the real estate basket — Nitesh, JP Infra, Prestige, Lodha, Emaar and BPTP. Do you think there is appetite among the investors for so much paper from this sector?

Investors also understand the structural story. It all depends on valuation. If there is upside for investors, that is what we have seen, then clearly people will buy them, but the key thing there is only a limited supply of money coming in. Some of the primary issues could crowd off secondary market movement perhaps. That is a possibility. I do not disagree with that because there is only a limited pool of money that comes into India; it either goes into primary. If there are a lot primary, then secondary interest is low.