Demand and realisations are expected to be low in real estate sector in 2020, according to a recent report by Crisil Ratings, an S&P Global company. The company expects real estate to be one of the sectors to take longest time to recover.
In a recent report, CRISIL slashed its base-case GDP growth forecast for fiscal 2021 to 3.5%. “Intensifying Covid-19 pandemic and a looming global recession have cast an unprecedented cloud over the credit quality outlook of India Inc, which has already been impacted by a slowing economy,” it said.
India’s gross domestic product (GDP) growth for fiscal 2021 was pegged at 6% by the Reserve Bank of India
(RBI) on February 6, and by CRISIL at 5.2%. CRISIL has since revised its reading 170 basis points lower to
3.5%, while the RBI in its monetary policy meeting in March, decided not to provide an outlook on GDP
The company conducted a survey on 35 sectors and foresee India Inc’s credit quality deteriorating in the near term. These 35 sectors account for over 3,000 firms and over 71% of the debt (excluding financial sector) in CRISIL’s rated portfolio.
Of this, real estate falls in the 4% category where the debt is in the least-resilience category. Others in the category include airlines, gems & jewellery and auto dealers due to the discretionary nature of goods and services, and weak balance sheets.
These sectors could be cramped by collapsing discretionary demand or high leverage. Consumers are expected to defer purchases in the real estate sector which may lead to high revenue disruption.
Cement industry may display high resilience due to multiple reasons such as presence of sufficient cash reserves to reach production readiness, continued/uninterrupted production being part of chain of essential goods and services, high prospects of immediate demand restoration as soon as the pandemic restrictions are lifted and government or regulatory support.
Supportive measures from the government and the RBI have eased pressure on cash flow across various sectors for the near term. However, duration, spread and intensity of the pandemic will determine the extent of disruption in business performance the report said.