Covid-19 May worsen woes of residential Real-Estate Sector!
Due to coronavirus outbreak ICRA (Investment Information and Credit Rating Agency), expects that the net cash flows of residential developers to witness some decline.
In case longed outbreak may result in bust dynamics which would have a deeper impact on project cash flows and execution abilities. Such an impact combined with the continuing credit squeeze and existing inventory overhang in the sector, would likely result in significant credit pressures going forward.
On the other hand, reduced in construction exoduses, attributable to a slowdown in project execution activity, are expected to limit the overall decline in net cash flows, at least in the case of a short-term disturbance.
The three-month moratorium on term loan installments announced by the RBI today also provides comfort on overall developer cash flows during this period.
In case of longer outbreak may significantly impact developers’ project execution abilities and cash flows, giving rise to wider credit negative indications. But some strong diversified developers, having strong balance sheet adequate liquidity are expected to be better-positioned to manage the risks arising out of this event, including reductions in collections and disruptions in project execution.
Impact on Residential Real-estate sector
Demand risks for the housing sector are likely to increase, given the rising apprehensions on overall economic growth and contagion related fears leading to reduced walk-ins and inabilities to carry out site visits, thus resulting in some decline in new sales and the associated collect
Receivable CC (Committed collections) from booked sales may also get smash to some extent, given that mile-stone based payments may get deferred and some buyers may delay payments on account of economic doubts arising from the looming chance of job cuts and pay cuts as the crisis extends.
One-year addition in project execution timelines also provide by RERA guidelines, in case of events beyond promoter control. Thus, regulatory risks are also reduced in the case of a short-term disturbance.