The domestic rating agency, Fitch Ratings placed four real estate companies on Rating Watch Positive. This is following the improvement of industry fundamentals of companies such as Unitech, Omaxe, Parsvnath Developers and Ansal Properties & Infrastructure.
According to the rating agency, the fundamentals of domestic real estate sector are improving, as seen by better liquidity and improved demand in the residential segment.
All four Indian real estate companies in Fitch portfolio have reported increased year on year residential volume sales in first nine month of financial year 2010. "Enhanced affordability, lower mortgage rates, and better job security have helped revive demand for homes. Conversely, demand in the commercial segment remains weak, primarily impacted by over-supply and the scale-back of expansion plans by corporate India," said the rating agency report.
However, Fitch expects demand for commercial spaces to improve in half year 2010, consequent to the expected resumption of hiring in key sectors like IT and financial services.
"A substantial amount of equity funds raised and non-core asset sales by real estate companies have been utilised in the repayment of debt and interest costs, which has helped developers in general deleverage their balance sheets. Overall, credit metrics are expected to recover in 2010 and 2011, as developers are expected to improve their capital structure, operating margins, and liquidity," said the report.
