Ratings for real estate market shows signs of slump
Owing to a consistent weak end-user demand and contrary consumer sentiments, India Ratings has kept a negative outlook on the real estate fraternity for the financial year 2015. As per market reports, real estate firms have witnessed a downtrend in unit sales, operating margins, flat revenue and consistent decline in credit metrics and cash flows. Hence, for builders and developers in India, the financial year can be quite disconcerting.
Changing price
The sale of fresh housing units by registered real estate firms is likely to be low in the first half of the present financial year. This, can be attributed to the weak consumer sentiments and low real estate affordability because of high prices. However, the year 2013 bore witness to bank credit to the real estate sector that lead to double-digit year-on-year growth, indicating a build-up of inventories.
Despite weak demand, prices continued to remain high. As per market news, real estate firms will continue to experience a downtrend in FY15. High residential prices that has an adverse impact on sales, even though increasing bank credit to the industry, shows a sudden surge in inventory for the real estate community.
The road ahead
Given the present market scenario, the year 2014 will call in for subdued commercial property demand, on account of slow economic growth that is likely to adversely affect fresh hiring in major sectors. The real estate fraternity has been of much interest for the foreign and private equity investors. In the last year, a strong investor interest was registered in high rent yielding commercial units that resulted in several huge value transaction.’
Key developers in the country, vouch for REITs(Real Estate Investment Trusts) strongly, since it is likely to rope in more number of investors. This, as a result, will enhance the funding abilities. Since, REITs are expected to pour in most of their money into rent-yielding commercial units, it can provide liquidity option to commercial property realtors.
