Realty sector to be under pressure: Macquari | india | Hindustan Times
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Realty sector to be under pressure: Macquari

The Indian real estate sector is likely to remain under pressure for the next few months due to small capital flow into this segment as lending to developers has not improved considerably among other factors, a report says.

india Updated: Feb 08, 2009 18:37 IST

The Indian real estate sector is likely to remain under pressure for the next few months due to small capital flow into this segment as lending to developers has not improved considerably among other factors, a report says.

"We maintain a zero weight for India in our regional real estate portfolio. On a 12-month view several real estate names in India look good value, but for the next few months expect the sector to come under continued pressure," Macquarie Research said in its report.

In today's scenario, banks are scrutinising mortgage borrowers more closely but they have resumed lending to some extent. "However, lending to developers has not improved and may have tightened even further and the well is dry for developers," it said.

"Borrowing for developers remains very, very tight. Conditions are perhaps at their worst ever level. Project financing has dried up as banks will not put money up front for developments," the report said and added : "Banks are now waiting for pre commitments for up to 30-40 per cent of developments before approving finance."

Besides, there are concerns regarding the structural challenges within the sector, such as the requirement for promoters to disclose their equity stake pledges and the possible equity holder dilution which may come about due to strict bank lending policies to developers.