The market share of the top 11 listed players, India Ratings and Research has analysed, increased to 14 percent in 2018 from 10 percent in 2015.
A rating agency has maintained an overall negative outlook for the real estate sector for the financial year 2020 but has a stable outlook for players in tier-I residential real estate, commercial office, retail property development and operations.
India Ratings and Research (Ind-Ra) expects tier-1 residential players to generate strong sales due to the ongoing consolidation in the market with fringe players losing ground.
The market share of the top 11 listed players, India Ratings and Research has analysed, increased to 14 percent in 2018 from 10 percent in 2015.
Conversely, tier-II and marginal players are struggling amid liquidity issues on account of declining sales, negative cash flows, RERA implementation and the slowdown in non-banking financial company (NBFC) space.
Ind-Ra expects the NBFC lending growth to the real estate sector to slow down further in the second half of the financial year 2019 and financial year 2020, given the increased risk aversion by NBFCs and their liquidity situation, after slowing down to 37 percent in the first half of financial year 2019.
The rating agency also believes the affordability in the financial year 2020 would be better than that in financial year 2012, if the residential prices remain flat. Growth in residential prices was almost stagnant in financial year 2018 and the first half of financial year 2019, which has resulted in time value correction in prices, leading to improved affordability.
Several residential players are expanding their portfolio in the affordable segment, given the favourable policy support such as Credit Linked Subsidy Scheme, lower GST and exemption under income tax, however, timely project execution within cost budget, given lower sales realisation, remains critical, said the report.
Companies with completed inventory will be in a better place in terms of offload risk than those with under-construction projects, as the demand is driven by end-consumers who are averse to risks, it said.
The interim Budget 2019 has also extended exemption from levying tax on notional rent of completed inventory to two years from the end of year in which the project gets completed. Also, there is no GST on completed inventory sale while GST on under-construction projects has been reduced to 1 percent to 5 percent effective from April 2019 (without input tax credit) from 8 percent to 12 percent.
Cash flow from operations (CFO) has been negative in the real estate sector since financial year 2012 and is likely to continue. Ind-Ra expects tier-1 players to report neutral-to-positive CFO while fringe players are expected to continue to have negative CFO in the financial year 2019 and financial year 2020, the report says.
The agency expects stable occupancy and rental rates for the commercial office segment across the major micro-markets, driven by a healthy demand from IT/ITES, e-commerce players and co-work office aggregators.
Given strong rental yields and stable cash flows, Ind-Ra believes commercial office will continue to enjoy financial flexibility on account of investor inclination and its refinancing ability. Demand in the retail property space will be supported by increasing penetration by organised players, rising consumer spending and favourable demographics, the report said.
