News: COVID-19 Impact: Demand for housing likely to remain suppressed in FY21, says India Ratings-19-03-2020
https://economictimes.indiatimes.com/wealth/real-estate/covid-19-impact-demand-for-housing-likely-to-remain-suppressed-in-fy21-says-india-ratings/articleshow/74713964.cms
Updated On: Mar 19, 2020
The ratings agency expects the unsold inventory levels to remain stable at around 14 quarters in the current and next financial year, supported by limited launches and deferment of launches in view of COVID-19.
MUMBAI: Demand for housing is likely to remain suppressed in 2020-21 (April-March) given the increasing downside risks to the country’s economic growth, should the outbreak of Coronavirus sustains through the first quarter of the next financial year, said ratings agency India Ratings and Research.
Residential demand is expected to decline in 2019-20 (April-March) after showing a slight improvement over the last two years, 2016-17 and 2018-19.
“Demand-side risks combined with rising uncertainty over credit availability for the sector in the light of recent financial market meltdown and increasing risk aversion could add to the refinancing as well as liquidity risks for the sector,” India Ratings said.
The ratings agency expects the unsold inventory levels to remain stable at around 14 quarters in the current and next financial year, supported by limited launches and deferment of launches in view of COVID-19.
Of the six key markets, Hyderabad and Pune have the least quarter to sell inventory while Chennai has the maximum unsold inventory, followed by Mumbai Metropolitan Region as of December end.
In the first three quarters of the financial year, residential sales fell 4% from a year ago to 204 million sq ft across the top six cities in India. National Capital Region has seen the maximum decline during this period while Hyderabad has continued with its strong growth momentum in terms of the area sold, India Ratings said.
The residential sector continues to underperform as an asset class impacting the investor demand. Hyderabad is the only market that has shown a price compounded annual growth rate (CAGR) of high single digit, while the other markets have lagged behind with sub-par price CAGR of 1%-2% over the last five years.
Large residential developers have continued to generate strong sales due to the ongoing market consolidation so far this year. Pre-sales for top 10 listed players grew about 7% from a year ago in the first 3 quarters of the financial year to 21.3 million sq ft.
However, the ratings agency believes that the sales and thus cash flows for these players could also come under pressure, if the Coronavirus outbreak intensifies in the country.
