Bloomberg.com article on slowdown. Now the SBI chariman and the HDFC Vice-chairman are calling for lower prices. Will the dodo bulls go extinct ??
By Sumit Sharma
July 10 (Bloomberg) -- India's real estate industry may witness the exit of weaker developers as a rise in interest rates and property prices deter buyers and crimp sales, Fitch Ratings said in a report.
Mumbai recorded a 16 percent drop in registrations in the year to March 31, and sales may fall further across India's major markets if developers hold on to prices, Fitch said. Fitch has rated its short-term outlook on the industry as negative.
``The slowdown will also aid the process of weeding out some of the weaker entities within the sector, and increasing the relative strength of some of the larger, more established developers,'' Sandeep Mulik and Roopa Raman, analysts at Fitch Ratings, said in the report in Mumbai today.
Some developers face fund shortages and may tap buyout firms as investors sell real estate stocks on falling sales. Still, a prolonged slowdown may damp the appetite of private equity funds, forcing smaller developers to either borrow at higher rates or default on their obligations, Fitch said.
The central bank on June 24 raised interest rates to the highest in six years to contain inflation that accelerated to 11.63 percent in the week ended June 21, the fastest in 13 years.
Bankers including Om Prakash Bhatt, chairman of State Bank of India, the nation's biggest, and Keki Mistry, vice-chairman of Housing Development Finance Corp., predict an end to the five-year rise in property prices.
Shares Drop
Real estate shares have led a drop in Indian stocks this year. The 14-stock Realty Index has fallen 62 percent since Jan. 1, compared with a 31 percent drop in the benchmark Sensitive Index. A dozen of the 14 property index stocks including DLF Ltd., Unitech Ltd. and Indiabulls Real Estate Ltd. have more than halved this year.
A decline in demand prompted DLF and Unitech, the largest developers, to delay selling shares in investment trusts in Singapore. Indiabulls Properties Investment Trust, which raised $258 million in Singapore last month, traded 22 percent lower at S$0.82 a share.
``The sharp increase in construction costs, driven by increased steel and cement costs, could also impact margins and hence liquidity,'' the Fitch analysts said. ``The risk would be higher for real estate companies with a limited track record and limited cushion for debt financing.''
Fitch also expressed concern at the high prices paid by some developers for acquiring land.
By Sumit Sharma
July 10 (Bloomberg) -- India's real estate industry may witness the exit of weaker developers as a rise in interest rates and property prices deter buyers and crimp sales, Fitch Ratings said in a report.
Mumbai recorded a 16 percent drop in registrations in the year to March 31, and sales may fall further across India's major markets if developers hold on to prices, Fitch said. Fitch has rated its short-term outlook on the industry as negative.
``The slowdown will also aid the process of weeding out some of the weaker entities within the sector, and increasing the relative strength of some of the larger, more established developers,'' Sandeep Mulik and Roopa Raman, analysts at Fitch Ratings, said in the report in Mumbai today.
Some developers face fund shortages and may tap buyout firms as investors sell real estate stocks on falling sales. Still, a prolonged slowdown may damp the appetite of private equity funds, forcing smaller developers to either borrow at higher rates or default on their obligations, Fitch said.
The central bank on June 24 raised interest rates to the highest in six years to contain inflation that accelerated to 11.63 percent in the week ended June 21, the fastest in 13 years.
Bankers including Om Prakash Bhatt, chairman of State Bank of India, the nation's biggest, and Keki Mistry, vice-chairman of Housing Development Finance Corp., predict an end to the five-year rise in property prices.
Shares Drop
Real estate shares have led a drop in Indian stocks this year. The 14-stock Realty Index has fallen 62 percent since Jan. 1, compared with a 31 percent drop in the benchmark Sensitive Index. A dozen of the 14 property index stocks including DLF Ltd., Unitech Ltd. and Indiabulls Real Estate Ltd. have more than halved this year.
A decline in demand prompted DLF and Unitech, the largest developers, to delay selling shares in investment trusts in Singapore. Indiabulls Properties Investment Trust, which raised $258 million in Singapore last month, traded 22 percent lower at S$0.82 a share.
``The sharp increase in construction costs, driven by increased steel and cement costs, could also impact margins and hence liquidity,'' the Fitch analysts said. ``The risk would be higher for real estate companies with a limited track record and limited cushion for debt financing.''
Fitch also expressed concern at the high prices paid by some developers for acquiring land.
0 comments:
Post a Comment