“Government’s move in November 2016 to curtail undeclared wealth by demonetising certain currency notes
is likely to take a toll on demand. Property and gold are popular instruments for investing undeclared income
in India’s large cash-based economy,” it said. Fitch
expects the credit profiles of most residential developers to weaken, as slower sales could mean cash collections will lag construction commitments.
“This would be particularly true for companies
that have aggressively expanded their land banks in the past two years by using cash collections from previously sold properties. On the other hand, firms that have liquidity to complete their projects within the next three to six months may be temporarily insulated from the shock,” Fitch
said it expected leverage (defined as net debt/adjusted inventory) of the seven large developers considered in the report to increase in 2017, from around 87 per cent at March-end (FY16) and 82 per cent at FY15.