Fitch puts Unitech, Ansal, 2 others on rating watch positive

NEW DELHI: Credit rating agency Fitch on Tuesday placed four real estate companies — Unitech, Omaxe, Ansal Properties and Parsvnath — on rating watch positive, in view of the improvement in industry fundamentals. Rating watch positive reflects the possibilities that the ratings can either be upgraded or affirmed at the current levels, Fitch said.

Fitch said sustainable operating performances, continued de-leveraging by developers over a longer period could lead to rating upgrades in the second half of the year. “The fundamentals of the domestic realty sector are improving, as seen by better liquidity and improved demand,” Fitch said.

All these companies reported increased year-on-year residential volume sales in FY10. It said enhanced affordability, lower mortgage rates, and better job security have helped revive demand for homes.

Demand in the commercial segment, however, remains weak. Fitch said it expects demand for commercial spaces to improve in the second half of this fiscal, consequent to the expected resumption of hiring in key sectors like IT/ITES and financial services.

A substantial amount of equity funds raised and non-core asset sales by real estate companies have been utilised in the repayment of debt and interest costs, which has helped developers in general deleverage their balance sheets.

Overall, credit metrics are expected to recover in 2010 and 2011, as developers are expected to improve their capital structure, operating margins, and liquidity.