In a recent development, India Ratings and Research (Ind-Ra) has maintained a negative outlook for 2020-21 (April-March) on the overall real estate sector. Given the limited financial flexibility of and reduced credit availability to companies, the stimulus packages provided by the government do not offer much hope to the sector.
For players in grade-I residential real estate, commercial office and retail property development and operations, the ratings agency has maintained a Stable Outlook. However, it has kept a Negative Outlook for non-Grade-I players for the financial year. Non-Grade I players have historically reported negative CFO since FY13 and may continue to do so during FY20-FY21, given weak sales and continued liquidity issues.
The ratings agency expects grade-I residential players to continue generating strong sales due to the ongoing consolidation in the market for the remaining part of financial year 2019-20, with fringe players losing ground in favour of grade-I with better brand and execution ability.
The market share of the top 10 listed players gradually doubled to 13% in 2019-20 from 7% and 6% in 2017-18 and 2016-17, according to India Ratings’ analysis. The agency expects this trend to continue for 2020-21 as well.
On the contrary, the woes of non-Grade-I players have increased under Real Estate (Regulation and Development) Act and slowdown in lending from banks and non-bank finance companies amid liquidity issues on account of declining sales, negative free cash flows, and stricter regulatory compliance. As per the ratings agency, the housing affordability in the current financial year is better than 2011-12.