Property developers confident about demand and new project launches, rising interest rates not a drag

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New Delhi: The real estate sector is constantly at the center of attention as we have seen robust collections and new launches in all regions, even during the difficult times of the pandemic. Axis Capital organized a real estate conference in India to understand the current real estate scenario. Well-known developers participated in the conference and gave their views on the industry and the company in general.

Participating developers remained confident

(1) strength of underlying demand

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(2) their risk aversion for borrowing and

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

Alongside the outlook for the sector, a round table on credit to the sector was also organised. Participating private capital and the developer remained positive about the availability of growth capital for the right developers and the multiple options to explore for growth. Raising interest rates by 100 to 200 basis points will remain ineffective given the massive reduction in sector debt among developers.
Developers present on Day 1 included DLF, Macrotech (Lodha) Developers, Godrej Properties, Oberoi Realty, Shriram Properties and Embassy Office Parks REIT.

Takeaways from the roundtable on credit and its availability for real estate.

-The availability of credit from banks is one of the reasons for consolidation. The number of lenders declined significantly after the NBFC crisis in FY2018. Banks resumed direct lending but to select names

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

– Developers in Mumbai need more money as approval costs are high while initial requirement is lower in Bengaluru, Gurugram and Pune.

– Term of loans: an ideal period to retain working capital debt for residential projects is between 12 and 30 months

– Will rising interest rates have an immediate impact on housing demand? Historically, interest rates have not been the primary determining factor for end users buying homes. The lender and developer agreed that pricing and ticket size of the offer remain the key affordability metrics for buyers. While rapidly rising interest rates may dampen sentiment, developers will focus on keeping products affordable (low price increase) and may offer attractive payment options.

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