HFCs can offer a CAGR return of 25% over the next few years: Deven Choksey

In a chat with ET Now Deven Choksey, MD, KR Choksey Securities, shares his view on the real estate sector.

ET Now: Share with us you view on the real estate sector. While we are rejoicing the way pharmaceuticals are performing, of late, real estate stocks too have started performing well. What is triggering the rise? Do you think that this is just a case of basket buying?

Deven Choksey: These stocks are gaining momentum on hopes of rate cuts. In addition, there are some quality realty companies, where assets and valuations are lower than that what their market market value is. A rerating in these stocks might happen. Here, I am not suggesting that the rerating would happen across the board. It would happen, but in select counters.

Having said that, I would wish to highlight that commercial real estate segment is still not recovering. But, the residential real estate market has really started looking up. Demand is rising in the residential realty space.

With the rate of interest coming down, buyers would probably be more keen to get into this particular space. Hence, we believe that there is some amount of merit at least with few companies in the realty space.

ET Now: Broadly, if you have to scan through the entire real estate pack, where would you be comfortable? What would you like to buy as it is the only large sector, I guess, which is still available at bear market valuations?

Deven Choksey: Absolutely. These stocks are really available at a valuation which is far too low. Again the confidence level remains high with those companies, which are not land holding companies because that is an area where we are not very comfortable.

Therefore, Asset light models such as Mahindra Lifespace is what we like. Even Oberoi Realty and Godrej Properties are some of the companies within the listed space that we feel are good companies as far as the up move is concerned in this space.

These companies should be benefited.

Disclaimer: Investors are required to look at real estate companies on a merit basis.

The stocks that I have mention have good business model. Hence, one could consider these stocks. Meanwhile, I also prefer south-India based Sobha Developers. It has a good business model. In the north, NBCC is one you can consider.

But, if you ask me where exactly the investor could make more amount of money other than real estate at a steady rate of return, I would of that housing finance companies (HFCs).

A couple of listed HFCs which are looking really good; they can be considered for investment because they could end up giving you steady rate of return for around 25 per cent on CAGR basis for next few years. Certainly, it is a good choice to add into the portfolio if one wants to take entry into real estate space.