>REAL ESTATE SECTOR (GOLDMAN SACHS)

■ 2010 outlook: Sector to Attractive from Cautious: Looking into 2010, we believe expectations for office absorption and rentals are still low and this segment could provide the next leg in the sector’s recovery. With some green shoots visible, we expect office absorption to pick up in 2010 as GDP growth returns to 8%+ levels, as our economists forecast. We also envisage steady growth in key residential markets with months of unsold inventory falling back to early 2008 levels and expect residential to remain a significant part of RNAV. We raise our sector view to Attractive from Cautious. Risks to our sector view include policy tightening.

■ Upgrade DLF to Buy from Sell; increase TP to Rs463 from Rs375: We upgrade DLF (DLF.BO) to Buy from Sell and raise our 12-mo TP to Rs463 (from Rs375). DLF offers exposure to the office market (about 20% of FY11E RNAV), where we expect absorption to pick up in 2010, followed by rising rents in 2011. We also expect the proposed DAL integration to reduce an overhang on the stock. The Delhi residential launch in 2009 bodes well for other city-centre launches in 2010. Although long awaited, we also expect progress on asset disposals in 2010. Risks: 1) slow office recovery, 2) execution delays.

■ Indiabulls RE to Buy from Neutral; TP to Rs269 (from Rs264): In addition to not attributing much value for power, we believe Indiabulls RE (INRL.BO) stock is neither pricing in a strong recovery in the Mumbai office market nor taking into account Indiabulls’ Mumbai residential projects. We believe the stock could move higher on 1) a pickup in Mumbai office leasing, 2) execution on residential projects and power, 3) news flow on successful bids for upcoming projects. Key risks include continued weak residential sales momentum and low earnings visibility versus peers.

■ Reiterate Buy (Conviction List) on Unitech; Sobha to Neutral: We remain positive on Unitech (UNTE.BO) with a new 12-m TP of Rs128 (vs. Rs125) and believe the stock will re-rate as the market sees evidence that volumes remain robust and the company is making progress on execution. With stabilization in the Bangalore market, we upgrade Sobha (SOBH.BO) to Neutral from Sell with a 12-m TP of Rs250 (vs. Rs202). We maintain Neutral on HDIL (HDIL.BO) and raise our 12-m TP to Rs379 from Rs349. We raise our 12-m TP on Parsvnath to Rs118 from Rs103 but maintain Sell on a sector-relative basis.

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