Next one year will be tough for Indian realty sector; Jones Lang LaSalle

Mr. Ramesh Nair

According to International property consultant Jones Lang LaSalle, the US and European debt crisis affecting sentiments across the world, the Indian real estate sector is likely to see a gloomy phase in the next one year  and developers would face liquidity crunch, low sales and pressure on margins.

The realty consultant company pointed out that the projects would be delayed, unsold housing stock will rise and developers might have to offer new projects at about 10-15% discount, all because of a slowdown in property demand.

Mr. Ramesh Nair , MD (West India) Jones Lang LaSalle India Said, "The US and European debt worries have added to the uncertainty. With the escalating global liquidity issues, these are challenging times. Over the next 12 months, we definitely expect these sentiments to reflect in the financial profile of the Indian real estate sector.The banks would further tighten lending to realty sector and disbursal rate of home loans is bound to reduce.Indian developers will be under pressure to reduce their debt-to-equity ratios. Fund raising through the QIP route will reduce, and we are going to see a decrease in real estate IPOs.
The high interest rates, increase in vacancy and demand slowdown will impact the earnings of developers leading to a slowdown of construction activity and delay in project delivery. The margins of Realtors would also be affected due to increased construction costs"

In order to generate funds, many Indian developers will sell their non-core land and divest their stakes in non-core businesses such as hospitality and retail.

Major firms like DLF is selling its non-core assets to cut its huge debt that stands at over Rs 20,000 crore. Unitech at present has debt of about Rs 4,000 crore.

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