** Citi says Lifestyle Communities' LIC.AX business update highlights improving sales rate and progress on strategy, now sees downside risks "largely contained"

** Brokerage retains "buy" rating, target price A$7

** Residential home developer on Friday said it has made 43 new sales in 7 weeks of 2Q26 vs 50 sales in 13 weeks of 1Q26

** Citi says update highlights improving sales run rate, confirms feedback from other developers that Melbourne market is starting to recover

** Citi also sees further upside near term with an improving established housing market, thus driving higher sales for land lease developers

** Brokerage also flags company has executed on strategy in reducing net debt, now at A$338 million as at October 31 vs A$460 million at June-end

** Stock down 36.7% so far this year, as of last close

(Reporting by Nikita Maria Jino in Bengaluru)

((Nikita.Jino@thomsonreuters.com;))