Credit rating agency India Ratings and Research (IndRA) on Thursday said it has maintained a negative outlook on the overall real estate sector for the next financial year 2020-2021 as the ongoing liquidity crisis and weak consumer sentiment continue to hurt housing demand in major cities.
“The stimulus packages provided by the government for the sector does not provide much hope, given the limited financial flexibility of and reduced credit availability to companies," India Ratings and Research said in a report published on Thursday.
According to the Fitch group company, while market share of top ten listed real estate firms have increased sharply, fringe players in the sector are “losing ground in favour of grade-I builders with better brand and execution ability."
“The market share of the top 10 listed players gradually doubled to 13% in FY20 from 7% and 6% in FY18 and FY17, respectively," it said, adding that the trend is expected to continue for FY21 as well.
The reported pointed out that the non-grade-I developers are likely to face significant challenges in the near to medium term to meet interest expenses due to the weak demand and liquidity issues. Declining sales, negative free cash flows, stricter regulatory compliance under Real Estate (Regulation and Development) Act and slowdown in lending from banks and non-bank finance companies have continued to impacting these builders.
According to the report, Grade-I real estate developers reported healthy and stable margins of 27% in the first half of financial year 2019-2020 on the back of improvement in sales. However, it also highlighted that housing affordability has improved in financial year 2019-2020 as compared to eight years ago.
“Growth in residential prices was muted in FY18-1HFY19, resulting in time value correction in prices and consequently improved affordability," it said.