According to India Ratings and Research, real estate sector will have to go for a structural change in the way it operates for its business. This has to be done to make it flourish again and reanimate itself in the market, and move towards a model which focuses on unit sales after the completion of the projects.
For 2017-18, the Ratings Agency has given a negative perspective on the real estate sector given the continuous downfall in the sales of residential properties. This will lead to negative cash-flows and will ultimately increase the debts making the credit profile of the real estate sector very unimpressive.
For these structural changes in real estate to be successful, adoption of single-window system is mandatory. This will also ensure survival and growth in the long term.
The sales of residential units have been witnessing a downfall since 2013-14 because of the shooting prices making it unaffordable for end consumers. Another reason is the continuous delays in the completion of projects, on the developers’ end. Both these reasons have made consumers lose their trust and confidence in the realty sector. The number of people buying residential units for investment purposes will also get severely affected because of demonetization, activeness of Benami Transactions Act and the restriction on the setting off the loss of rented units under other income heads.
This continuous fall in the sales of residential properties is expected to limit the liquidity which will also complemented with the real estate act becoming effective on 1st may, 2017. The sector depended highly on refinancing for the returning of debts, but the ratings agency suspects that refinancing will become tough if the sector also wants to revive itself.
