Construction firms face order cancellations as demand drops

Developer will be forced to cut prices.

Beleaguered oil and gas players are not the only companies which face the risk of contract cancellations this year. According to a report by Deutsche Bank, builders are also under threat of project deferrals on back of sluggish demand in the construction sector.

“The construction industry will likely see cancellation of orders this year, resulting in a worsening of the supply-demand imbalance,” said Taimur Baig of Deutsche Bank.

“The residential real estate has experienced some price correction, but nowhere close to being sufficient to clear the market,” he added.

And while many developers have stubbornly refrained from cutting prices in hopes of riding out the cycle, Baig said that some builders may be forced to cut prices soon as regulatory easing seems unlikely in the near-term.

“But as relief (regulatory or demand-related) remains elusive, the market may have to capitulate at some point. Even the well-performing service sector continues to face margin pressure from policy-induced labor markets,” he noted.