Home prices to remain resilient in 2016: Fitch

Developers' pre-sales to rise 5-10% in 2016

Residential property prices would remain stable next year due to an improvement in demand, said a new report from Fitch Ratings.

“Residential property prices should remain resilient in 2016, supported by improving demand,” the rating firm said. Property developers were reluctant to reduce prices and had instead used easy-payment schemes to woo buyers. “As a result, there has not been a major price correction in residential real estate since at least 2011, according to the residential price index published by the National Housing Bank of India,” it said.

The average selling price for the sample of companies included in Fitch’s report in the first half of 2016 was 13 per cent higher than in FY15, but primarily because the sales mix shifted to higher-end units, it said.

Fitch expected pre-sales of property developers to improve by five to 10 per cent over 2016. But reduction of the companies’ debts would be gradual as many companies had introduced easy payment schemes, delaying cash payment from buyers.

In a recent report, CRISIL had said with tepid demand for space, especially in the housing segment, the country’s top 25 real estate companies were staring at a problem in refinancing debt worth a combined Rs 30,000 crore over the medium term.

Pre-sales rose by 18 per cent in the financial year ended March 31, 2015, for the seven large property developers that Fitch has tracked in its latest report.

Fitch also expected inventory turnover to improve on a sector-wide basis in 2016, driven by more sales, and developers limiting the launch of new projects to focus on selling and completing projects. Inventory turnover for the sample improved to 2.9 years in September 2015 from 3.8 years in March 2015, and a peak of 4.6 years in March 2013.