Real Estate Developers confident on demand and new project launches, interest rate hike not a dampener

New Delhi: Real Estate sector is constantly in focus since we have seen robust collections and New launches across regions even during tough times of Pandemic. Axis Capital organized India Real Estate Conference to understand the present Real Estate Scenario. There were known developers who participated in the conference and gave their views on the sector and business at large.

Participating developers remained confident of

(1) strength in underlying demand

(2) their risk aversion to borrowings and

(3) plans to launch more projects as inventory levels are low

Along with the sector outlook, a panel discussion focusing on credit towards the sector was also organized. Participating private equity and developer remained positive on the availability of growth capital for good developers and multiple options to explore for growth. An increase in interest rates by 100-200 bps will remain ineffective given the massive debt reduction in the sector across developers.

Attending developers on Day 1 included DLF, Macrotech (Lodha) Developers, Godrej Properties, Oberoi Realty, Shriram Properties, and Embassy Office Parks REIT.

Takeaways from the Panel discussion on Credit and its availability for Real Estate.

-Availability of credit from banks is one reason for consolidation. The number of lenders has reduced considerably post the NBFC Crisis in FY18. Banks have picked up direct lending but to select names

- Private equity continues to see a huge opportunity in residential real estate: Developers want to expand more, and opportunities for private equity developers to participate in projects remain high.

- Developers in Mumbai require more money as approval costs are high, while the upfront requirement is lower in Bengaluru, Gurugram, and Pune.

- Tenure of loans: An ideal period to keep working capital debt for residential projects is between 12-30 months

- Will rising interest rates impact housing demand immediately? Historically, interest rates have not been the key moving factor for end-users purchasing houses. Both lender and developer agreed that pricing and ticket size of offering remains the key parameters of affordability for purchasers. While fast-increasing interest rates might act as a dampener in sentiment, developers will focus on keeping the products affordable (low increase in price) and might offer attractive payment options.