India Ratings today revised its outlook for the country's real estate sector for 2013 to 'stable' from 'negative' as the Fitch group company sees signs of improvement in margin and liquidity of developers.
"An encouraging trend noted by India Ratings is the easing of liquidity pressures. In financial year 2012-13, real estate companies generated positive free cash flows and the trend expected to continue into first half of 2013-14", India Ratings said in its report released today.
"Real estate outlook (revised to)...stable; signs of improvement visible", it said.
Commercial real estate developers, especially those with cash flow visibility through lease and rentals, continue to have better credit profiles, the report said.
Noting that the demand for retail space was 'likely' to be muted over the next few months, the report said: "Persistence of adverse sentiments, high inflation and high interest rates which reduce affordability, coupled with high property prices, continue to hinder improvement in demand".
"Commercial demand will be hit by subdued job growth in IT sector", it said, adding that companies would be required to rely less on debt financing and focus on buyer advances and internal accruals to achieve significant improvement.
Observing that the demand for residential real estate developers witnessed an upward trend last year, the report said, "sales of large (real estate developers) players declined marginally in 2012".
"Economic weakness continued with the associated apprehension of employee downsizing and salary freezes, which adversely affected consumer sentiments", the report said.