Fitch Prediction-Indian real estate sector 2008 outlook stable with a little negative bias

MUMBAI – Fitch Ratings said its outlook for the Indian real estate sector in 2008 continues to remain generally stable with a minor negative bias.

It is told by ratings agency that growth over the preceding 3 years has been supported by great economic fundamentals, with better demand on the one hand and increasing supply supported by equity raising on the other.

While Fitch believes these fundamentals should remain sound in 2008, property prices are estimated to moderate though the extent will vary from area to area.

Fitch also expects geographical diversification to continue through 2008 after real estate companies have extended to cities outside their main area of business. However, real estate markets will remain reasonably regional with some superior players establishing a panIndia presence.

According to Fitch revenue growth will continue in 2008 as companies persist to launch a number of new projects and created strong top line growth in 2007. Yet, the execution risk will become more marked as the area under development would be significantly larger than in the past, Fitch said.

Earnings margins in the real estate industry may be affected by rising land prices and lower selling prices in 2008. Whereas companies with historical land reserves would continue to record strong profit margins, companies that have purchased land in the last three years (at higher prices) may encounter a decline in margins from the levels of 2006 and 2007.

Fitch expects the overall debt level of real estate companies to increase in 2008.