>REAL ESTATE (MOTILAL OSWAL)

Bet on city-centric focused plays: The ongoing recovery in the real estate sector has been faster than expected. While the residential vertical is in a strong growth phase, we expect other verticals such as the retail and commercial sectors to recover faster than expected. We believe, at this stage of the real estate cycle, well managed mid-cap companies with a city-centric focus provide good investment bets. The ongoing recovery in the real estate vertical has been primarily strong in tier-1 cities, such as Mumbai, Delhi and Banglore, while recovery is still to gain momentum in tier-2 and tier-3 cities. We expect tier-1 city-centric players to outperform those with high concentration in tier-2 and tier-3 cities.

BUILDING UP

Key RE companies have strong monetization visibility: Key mid-cap RE companies have strong monetization visibility over the next three to four years, with top three or four key projects accounting for most of their NAV. The acceleration in the RE recovery will allow these RE companies to accelerate their monetization process and pursue NAV enhancement strategies.

RE sector to enjoy increased access to institutional funding: Worldwide the maturity of the real estate sector is gauged by the availability and access to institutional funding. While the access to institutional funding for domestic real estate companies increased significantly since FY06, the domestic real estate industry continues to be at a nascent growth stage. We expect increased access to institutional funding such as REITs and REMFs to drive growth in the domestic sector over the next few years.

Top picks: The RE sector seems firmly set for recovery, following the successful balance sheet recapitalization by key RE companies and the pick-up in RE activity. We believe key mid cap real estate companies, with a city-centric focus, robust financials and strong near-term monetization visibility, are well placed to capitalize on the growth phase ahead, as they can shift focus to project monetization and pursue NAV enhancement strategies. Again many of the key mid-cap real estate stocks are trading at discounts to their NAV and provide good investment opportunities. Our top picks in the mid-cap real estate segment are Anant Raj, Mahindra Lifespaces and Phoenix Mills.

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