Presales of property developers will improve by 5-10% over 2016 but their debt reduction will be gradual because many companies introduced easy payment schemes over the past 12-18 months which delay cash payment from buyers, says a new report from rating firm Fitch Ratings.
Presales rose by 18% in the financial year ended March 31, 2015 (FY15) for the seven largest property developers that Fitch tracked for its latest report.
Fitch also expects inventory turnover to improve on a sector-wide basis in 2016, driven by more sales, and developers limiting the launch of new projects to focus on selling and completing existing projects. Inventory turnover for the sample improved to 2.9 years in September 2015 from 3.8 years in March 2015, and a peak of 4.6 years in March 2013.
Residential property prices should remain resilient in 2016, supported by improving demand, it said. “Developers have been reluctant to reduce prices, and have instead used easy-payment schemes to woo buyers. As a result, there has not been a major price correction in residential real estate since at least 2011, according to the residential price index published by the National Housing Bank of India,” Fitch said.
The average selling price for the sample of companies included in Fitch's report in 1HFY16 was 13 per cent higher than in FY15, but primarily because the sales mix shifted to higher-end units.
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