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National: India Ratings Revises Real Estate Sector Outlook to Negative-to-Stable

India Ratings revised realty sector outlook to negative-to-stable for 2013 from negative in 2012. On Wednesday India Ratings & Research announced that signs of stability are noticed. Demand is still muted with low EBITDA margins, causing weak credit metrics for real estate companies.

 

According to the reports released on Wednesday, Indian Ratings noticed an encouraging trend in Indian realty industry. The positive free cash flows generated in 2012-13 is expected to be continued in first half of 2013-14.

 

Year-on-year growth in home loans from banks, showed up trend in demand from May 2012 with stabilised residential real estate demand in 2012. Apart from the stable demand other endeavors that helped in improved liquidity included different strategies such as monetization of land and non-core assets, Joint Venture route adoption to develop projects and practicing prudence in new launches.

 

As per the reports large players also noticed marginal decline in sales in 2012. Along with skyrocketing property prices, economic weakness, employee downsizing, adverse sentiments, high interest rates and increasing inflation were some of the vital factors that reduced affordability of the buyers, leading to reduced demand.

 

Muted job growth in IT sector will have impact on commercial demand. In near term retail space demand is anticipated to be subdued. The report said that the companies need to depend less on financing. These will have to concentrate more on buyers’ advances and internal accumulations to succeed.

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