Real estate sector may stabilise in 2H: Fitch

Fitch Ratings has today said that its outlook for the Indian real estate sector remains negative, though the sector could exhibit signs of stability by the second half of the year.

In a specil report titled, Indian Real Estate 2010: On the road to Recovery, Fitch notes that the fundamentals of India's real estate sector are improving, as seen by better liquidity and improved demand in the residential segment.

The agency expects growth in 2010 to be driven by government support, especially for the affordable housing segment, improved access to debt and capital markets, and the recovery of real estate demand.

However, it warns that the government may roll out moderately adverse policies to keep property prices in check when economic conditions stabilise further. In addition, the government may also find it politically difficult to provide a supportive environment if developers continue to increase real estate prices.

For Fitch to take a more favourable view of the sector, sustainable operating performances and continued deleveraging by developers over a longer period will be key positive factors, which the agency expects to see during the second half of the year.

Demand for both residential and commercial real estate segments slowed down considerably in H1 '09, with a significant drop in property prices. However, H2 '09 witnessed some revival, particularly in the residential segment. Enhanced affordability, lower mortgage rates, and better job security have helped revive demand for homes.