Projects would be delayed, unsold housing stock will rise and developers might have to offer new projects at 10-15% discount, all because of a slowdown in property demand
With 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 12 months and developers would face liquidity crunch, low sales and pressure on margins, consultant Jones Lang LaSalle said.
The country's leading realty consultant pointed out that the projects would be delayed, unsold housing stock will rise and developers might have to offer new projects at 10-15% discount, all because of a slowdown in property demand.
"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," Jones Lang LaSalle India Managing Director (West India) Ramesh Nair said. He said the banks would further tighten lending to realty sector and disbursal rate of home loans is bound to reduce.
"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," Nair said. To generate funds, the consultant said many 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 Rs20,000 crore. Unitech at present has debt of about Rs4,000 crore.
"This is an unsettling time for the market, and obviously for real estate investors as well. Are we looking at 2008 all over again?" Nair said, referring to the global economic slowdown in 2008 that had hit Indian realty sector badly. The consultant observed that 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, Nair said.
"We are likely to see pre-launch projects coming with at 10% to 15% discount, over the pricing of other projects in the same areas," he added. Besides, the distressed projects of smaller developers will be acquired by medium-to-large players at prices significantly lower than their original valuations.
"The only constant is change. This has been an axiomatic truth for the Indian real estate market over the last 24 months, with volatility having become a byword to describe it. There has been little or no respite from this state of flux," Nair said.
The service offers remittance facility for sending money to the intended beneficiaries, holding an account with Axis Bank or any of the 78000 NEFT enabled branches
Axis Bank said that it has tied up with Malayan Banking Berhad (Maybank), Malaysia, for remitting money from Malaysia to beneficiary accounts in India. Axis Bank has signed an agreement with Maybank for offering remittance facility to India, under Maybank Money Express (MME) service.
The service offers remittance facility for sending money to the intended beneficiaries, holding an account with Axis Bank or any of the 78000 NEFT enabled branches of over 100 other banks in India.
According to Kotak Securities report Indian banks’ branch expansion drive will not help ramp up deposit mobilisation, as deposits and loans will continue to be concentrated in urban markets
Indian banks' branch expansion drive, which has almost reached pre-crisis levels, will not help ramp up deposit mobilisation, as deposits and loans will continue to be concentrated in urban markets, according to an industry study. The study was conducted by Kotak Securities.
"We believe the current focus on branch expansion is unlikely to benefit banks, as 50% of the business is concentrated in the top 10 centres (12% of overall branches) and 70% of the business comes from the top 50 centres, which is 22% of total branches," said the report. It added that the trend has not changed in the top 10-20 centres over the past few years.
"Branch expansion in these centres has been higher than average with broad positive metrics (growth on deposits and loans per branch). However, we should expect to see a slowdown if the current pace of expansion continues," it said. As per the report, better targeting and products will result in further shift in the Casa (current and savings accounts) share to private banks. Nearly all private sector lenders have gained a larger market share in Casa deposits over their public sector counterparts due to their focus on high growth segments and better products and service delivery execution, besides the higher growth of low cost deposits in urban centres, it added.
However, the report said large PSU banks like SBI, Bank of Baroda and Union Bank have improved their market share through a national presence and strong growth of current account deposits in the Western region. But the loss of market share is visible in the case of Punjab National Bank, due to the competition it faces on branch expansion in the North, and in South-based PSU banks, despite healthy Casa deposit growth, the report noted.
The report further said that banks, especially large private ones, which have been growing at 20% annually over the past few years, are likely to go slow on their expansion plans due to the new guidelines that require 25% of new branches to be opened in unbanked areas. The study expected these banks to open low-cost branches and shift their focus to improved productivity levels and expanding their reach with customers through alternate channels and NBFC/business correspondents.