Covid-19 may worsen woes of residential real estate sector: ICRA

The three-month moratorium on term loan instalments announced by the RBI today also provides comfort on overall developer cash flows during this period.

ICRA, a rating agency, expects the net cash flows of residential developers to witness some decline on account of the coronavirus outbreak

“A prolonged outbreak may result in recessionary dynamics which would have a deeper impact on project cash flows and execution abilities. Such an impact, combined with the ongoing credit squeeze and existing inventory overhang in the sector, would likely result in significant credit pressures going forward”, said Mahi Agarwal, assistant vice president and associate head at ICRA.

However, reduced construction outflows, 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 disruption.

The three-month moratorium on term loan instalments announced by the RBI today also provides comfort on overall developer cash flows during this period.

A longer outbreak may significantly impact developers' cash flows and project execution abilities, giving rise to wider credit negative implications. Well-diversified developers with strong balance sheets and 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.

Agarwal said, “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, thus resulting in some decline in new sales and the associated collections.

Committed collections receivable from already booked sales may also get impacted to some extent, given that mile-stone based payments may get deferred and some buyers may delay payments on account of economic uncertainties arising from the looming possibility of job cuts and pay cuts as the crisis extends.

Developer ability to remotely issue and follow up on demand notices will also have a significant bearing on collection efficiency levels.”

Cost savings are also likely on account of the prevailing decline in commodity prices, thus leading to some trimming in outflows.

RERA guidelines also provide for a one-year extension in project execution timelines, in case of events beyond promoter control. Thus, regulatory risks are also reduced in the case of a short-term disruption.


Comments

  1. The adverse effects of pandemic on real estate market are further going to increase tensions for both buyers and sellers. Thank you for sharing this. For a managed community like homeowners association, the situations are similar. HOA website.

    ReplyDelete
  2. You've written an excellent post, and you've shared it with us about First Time Home Buyer Langley. Your article provided me with some unique and useful knowledge. I appreciate you sharing this text with us.

    ReplyDelete
  3. The information which you have provided is very good and essential for everyone. Keep sharing this kind of information. Thank you. real estate agents werribee

    ReplyDelete
  4. The casino promotes participant safety through responsible gaming, and it supplies varied companies to help members who consider they could be danger of|susceptible to|vulnerable to} creating a gambling downside. By an issue, we imply brief lived|a brief} cooling-off period to self-exclusion and even everlasting account disablement. Despite only being in enterprise for a 빅카지노 brief period, the workers at Ignition Casino has created a novel on-line casino with a shiny future. The web site is licensed and controlled, and it is a superb example of putting players’ enjoyment first. DraftKings Inc. and Golden Nugget Online Gaming Inc. signed a legally binding settlement in August 2021, following which DraftKings purchased Golden Nugget Online Gaming in an all-stock deal. With the acquisition, DraftKings might benefit of|benefit from|reap the advantages of} the established buyer database of more than 5 million folks and the well-known model experience of Golden Nugget.

    ReplyDelete

Post a Comment