Fitch projects India’s property sector’s outlook as stable
Evolving regulatory landscape, implementation of RERA, improvement in macroeconomic environment and a decline in interest rates may boost demand for property in India, says Fitch 2018 Outlook: Property/South and South East Asia. In India rapid depletion of unsold inventory may also quicken the sector’s revival, it says. It also said that a shift towards affordable housing will spur demand in Indonesia.
“Fitch forecasts a stable outlook for the south and south-east Asian property sector in 2018, mainly driven by improving macroeconomic conditions and growing business activity in Indonesia and Vietnam, and new regulations in India. Nevertheless, there may be disruptions to growth, especially from political risk leading up to elections in Indonesia,” says Bernard Kie, Associate Director.
Citing the example of two developers, it says that real estate companies are expected to focus on completing existing projects where land costs have already been incurred.
The implementation of the Real Estate (Regulation and Development) Act of 2016 (RERA), which came into full force on 1 May 2017, will continue to reduce the pace of new launches in 2018 as developers focus on completing existing projects. The introduction of a goods and services tax in 2017, while broadly neutral for the sector, is also shifting demand towards completed properties as they attract lower taxes.
These trends will drive consolidation in 2018 – larger and more financially sound developers will survive, while smaller or highly leveraged companies will likely resort to asset sales to shore up liquidity, it says.
It also forecasts that unsold inventory may fall in 2018 as most developers will focus on completing their property projects to comply with RERA. “Unsold inventory for a sample of seven large developers rose to INR668 billion at FYE17, from INR631 billion at FYE16. This translates to an inventory turnover of around three years of annual revenue at FYE17, up from around two years at FYE16,” it says.