The real estate sector comprises companies that build residential or commercial property. They could be local developers with a presence in just one city or a large pan-India company.
The sector is growing steadily due to rising income levels, urbanisation, and private investment. Growth is also driven by the demand from corporates.
The sector contributes about 13% of India's GDP. It's the second largest in terms of employment after agriculture and the third largest in terms of FDI inflows.
In theory, these companies have a simple business model of building and selling/renting property. But in practice, the sector is complex and difficult to understand.
Studying the financials of real estate stocks is just the first step to understanding this sector. You must also know various risks facing these companies.
These are the important points to keep in mind if you're thinking of investing in a real estate stock.
A big trend in the sector is consolidation. Bigger developers are buying out smaller developers. This has been observed locally and nationally.
Thus, while investing in these stocks, it's best to choose from the bigger players.
To find the safest bets in the Indian real estate sector, use Equitymaster's Stock Screener - Best Real Estate Stocks.
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