In 2018 the number of homes unsold is expected to fall as most realty developers will focus on completing their ongoing projects to follow with the Real Estate Regulation and Development Act of 2016 (RERA), according to Fitch Ratings.
The agency also expects the pace of new launches to keep reducing in 2018.
The agency said in a release, “This translates to an inventory turnover of around three years of annual revenue at FYE17, up from around two years at FYE16.”
The introduction of goods and services tax (GST), while broadly neutral for the sector, is shifting demand towards completed properties as they attract lower taxes, according to Fitch.
Fitch said, “These trends will drive consoliation 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.”
Meanwhile, Fitch expects the leverage of the two developers it rates – Lodha Developers and Indiabulls Real Estate. As compared to 70% in FY17 Lodha Developers and Indiabulls Real Estate has dropped their rates slightly to 68% and 67%, respectively, in FY18 and FY19.
Total presales for both the developers are expected to rise to around Rs 14,000 crore in FY18 and over Rs 16,000 crore in FY19, from around Rs 9,500 crore in FY17.