More pain for realty sector: Enam

Enam Securities said that there is more pain in store for the country's real estate sector in the next 6-12 months, but the long-term outlook is still positive."Short-term conditions are unfavourable because of dampened affordability, high interest rates and oversupply. These are likely to play spoilsport in the near term," Enam Securities' Senior vice-president (Real Estate) Pankaj Jaju said here.This kind of situation is likely to continue in the near term before looking up after 6-12 months, he said.Subdued demand and the resultant price correction in the short-term would affect project Internal Rate of Returns and as a result, the focus of the builders would shift from owning land to execution.In addition to that, inability of companies to access funds may result in liquidation of assets at lower prices, impacting their profitability considerably, he said."So far, belief in strong end-user demand and high investor appetite for under construction properties fuelled liquidity. This is now disappearing on account of inability to churn capital, possible oversupply situation and waning demand," he said.Jaju said that when all signs pointing to a correction in real estate prices, builders are holding on the inventories to rack rates.The long-term outlook is still positive because of favourable demographics, increased urbanisation and higher disposable incomes. However, reduction in mortgage rates and higher loan to value (LTV) ratio are critical to improve affordability and re-instate sentiment, he said.