DLF, Prestige Estates Set for Upside: UBS Realty Sector Report Shares Price Targets

India's real estate sector is poised for sustained growth, with UBS report on ‘Sustainable upcycle driven by multiple tailwinds’ highlighting favorable conditions and sector tailwinds. Initiating coverage on three leading players, the report underscores significant upside potential for DLF and Prestige Estates while signaling limited gains for Oberoi Realty.

Price Target Insights: DLF, Prestige, and Oberoi Realty
UBS has set ambitious price targets based on developers’ execution capabilities and market positioning:
DLF Limited: A price target of Rs 1,005, to buy
Prestige Estates: A target of Rs 2,175, to buy
Oberoi Realty: A relatively conservative target of Rs 2,230, with limited room for further re-rating.

"While the Indian property sector sales growth levels are close to global peak levels (20-30% YoY in FY25E and a 15% CAGR over FY24-29 vs -1% over the FY11-20 downcycle), Prestige and DLF multiples are 3.9-4.1SD from the bottom, implying room for upside, in our view. Oberoi's P/BV multiples are already up 5SD from the bottom, implying limited room for further re-rating,’ as stated in the report.

Sector Tailwinds to Drive Long-Term Growth
The report emphasizes structural factors supporting the sector’s resilience:
Residential Market: UBS forecasts a 15% CAGR in residential pre-sales through FY24-29, driven by low inventory and robust demand.
Commercial Real Estate: With a 26% topline CAGR projection, office expansions and regulatory reforms, like SEZ denotification, are key contributors.

UBS compared India’s real estate sector to China’s 2000-2010 property boom, predicting sustained growth. The report encourages investors to use any short-term market softness as a buying opportunity. “India's macroeconomic characteristics are in line with the China of the 2000-210 decade, post which China had a long property bull run lasting until 2021 (16-year price CAGR of 5% over mid-2005-mid-2021, vs -3% CAGR since then),” as mentioned in the report