Market sentiments of Indian real estate industry showing the negative impact on all fronts. The India Ratings & Research has maintained a negative to stable outlook on the real estate sector for 2014-15. this is on the back of continued lower demand by the consumer and no taker of the projects from developers and real estate firm.
Real estate companies have been facing the situation where they are not able to sales too many units and due to this overall gross revenue is declined, gross profit are also falling down and cash flow crunches is seen everywhere. this is also impacting the projects under development and some of the projects are taking backseat and time of delivery is get extended by 1 years or more.
NCR region with highest new launch and fast destination for realty investor seen the drop market and real estate agents are shutting shop in area like Noida, Gurgaon and Faridabad. this type of sentiment lead to some stable agents working for the projects and anyone with quick buck business objective have to go out of market.
in general terms real estate developer forecasting a stable outlook for the future and no larger growth, they are also going smaller cities and other location for new projects launch.
Festival season also bring more discount for consumer, however this is not uplifting the overall sentiments of the consumer.
The general consumer looking for a price falls in market for about 20 to 30% and then they will be optimistic to buy the properties or invest in the projects. However real estate developer citing several reason to not reduce the price, include the rising cost of the raw material and labor in market.
Most of real estate companies rated the agency have a stable outlook, as the risks impacting the sector have been factored into their ratings. The entities rated at investment grade are either single commercial properties with long-term lease agreements or residential companies with healthy sales and strong cash flows.
The rating agency believes credit metrics will continue to deteriorate in FY15, as high residential prices continue to impact sales, even while rising bank credit to the sector indicates an increase in inventory for the sector.
Ind-Ra expects subdued commercial property demand to continue in 2014, due to the continued slow economic growth which will impact fresh hiring in most sectors. Demand for retail space is also likely to remain muted in FY15, as retail companies continue to optimize their store portfolios.
The real estate sector has seen strong interest from private equity and foreign investors. During 2013, strong investor interest was seen in rent-yielding commercial properties with conclusion of several large transactions by leading private equity players such as Blackstone.
Ind-Ra expects the introduction of real estate investment trusts (REITs) to be positive for the sector, as it is likely to attract new investors and hence improve funding availability. As these REITs are likely to invest most of their funds into rent-yielding commercial properties, this could provide further liquidity options to commercial property developers, it said.