Fitch projects negative outlook for Indian real estate sector

Projecting a negative outlook for the domestic real estate sector in CY 2010 with a slight stable bias, a leading rating agency said while demand in the commercial space segment is expected to improve in H2, rentals would remain under pressure due to over-supply risks.

Projecting a negative outlook for the domestic real estate sector in CY 2010 with a slight stable bias, a leading rating agency on Wednesday said while demand in the commercial space segment is expected to improve in H2, rentals would remain under pressure due to over-supply risks.

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"Outlook for the Indian real estate sector in 2010 is negative, with a slight stable bias. Overall, the fundamentals of the real estate sector are improving, as seen by better liquidity and improved demand in the residential segment," Fitch said in its recent report, `Indian Real Estate 2010'.

The commercial segment continues to remain under pressure, as evident from the vacancy levels reported in various key markets, it said, adding, "Demand for commercial space to improve in H2-10 consequent to the expected resumption of hiring in key sectors like IT/ITeS and financial services."

At the same time, rentals are likely to remain under pressure due to the over-supply risks, which continue to persist, the report said.

On the retail side, the rating agency forecast that volumes would pick up and rents get stabilised by H2-10 due to retailers moving back into the expansion mode.