Global rating agency Fitch in a report claimed that property market in India is likely to be improved by the end of March 2016, following the upturn in the country’s investment and reduction in interest rates, they also mentioned that this will provide relief to the debt-ridden developers.
“The property development sector (will) be a key beneficiary of reductions in housing loan interest rates by several domestic banks in April 2015,” the agency said, adding that they would also boost credit growth.
Further they added, after Reserve Bank of India’s initiate to reduce the key policy rate
Besides, the Reserve Bank has reduced the key policy rate by 0.50 per cent since January, prompting commercial banks to cut interest rates for home loan and other borrowers. Many banks have reduced their interest rates on home loans.
Besides, the Reserve Bank has reduced the key policy rate by 0.50 per cent since January, prompting commercial banks to cut interest rates for home loan and other borrowers. Many banks have reduced their interest rates on home loans.
“We expect property developers with a greater exposure to the middle and lower income segments to benefit more from lower domestic interest rates,” it said, adding that developers with a greater mix of high-income customers, such as Lodha Developers and Indiabulls, will be less impacted because their customers are less sensitive to market interest rates.
Both the companies, it said, would meaningfully reduce the portion of debts by end-2016.
The rating agency observed that “the process of reducing leverage (debts) stalled in 2014 due to weak sales and slower cash collections on properties that were sold towards the end of 2014 and in early 2015, as developers introduced easy payment schemes to stoke demand.”
Earlier in the month, Fitch raised its forecasts for India’s GDP growth to 8 per cent for the current fiscal, up from 7.4 in per cent in 2014-15, and 8.3 per cent for 2016-17.
Fitch estimates that around 20 per cent of the sector’s sales over the last two fiscal quarters were financed by easy payment plans and observed “the longer cash collection cycle will continue to weigh on developers’ balance sheets in the near term.”
No comments:
Post a Comment