Property Sales may Drop 30% in 2017
The year 2017 is also expected to be another bad year for the realty sector. Fitch Ratings expects property sales in India to fall by at least 20-30 per cent in 2017, owing to the disruption caused by demonetisation and a general caution among home buyers.
Most builders are already sitting on high levels of unsold inventory and are likely to cut selling prices as demand weakens.
“We expect risks to rise further for the builders this year, as leverage levels are likely to increase and liquidity is going to tighten. Home prices should decline this year as demand for residential property weakened significantly in the fourth quarter of 2016, following the demonetisation of large-value currency notes,” Fitch Ratings said.
The cash ban in November 2016 made it harder for home buyers to use undeclared wealth for property payments.
According to Knight Frank Research, the number of residential property units sold fell 44 per cent on a year-on-year (YoY) basis in Q4 of 2016, dragging down overall units sold in 2016 by 9 per cent.
Real estate stocks have tumbled in tandem. Since January 2016, the share price of Unitech has slipped 33 per cent to Rs 4.56 till January 25, 2017, HDIL is down 19.28 per cent, Sobha Developers 18.17 per cent, Prestige Estates 15.29 per cent and Godrej Properties has gained 3.60 per cent in this period.
Bucking the trend, Indiabulls Real Estate, Omaxe, Oberoi Realty, DLF and Phoenix Mills advanced 24 per cent, 22 per cent, 14 per cent, 13 per cent and 10 per cent, respectively, during the same period.
Fitch Ratings said top-tier homebuilders such as Indiabulls Real Estate and Lodha Developers – which benefit from brand values – are yet to cut home prices substantially.