Realty Sentiment In July-September Drops To Demonetisation Level: Report
Signature Island, a residential tower developed by Sunteck Realty Ltd., stands under construction in the Bandra Kurla complex in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Realty Sentiment In July-September Drops To Demonetisation Level: Report

Sentiment in the real estate market has dropped to levels seen during demonetisation and is expected to remain pessimistic for the next six months, a survey has indicated.

The pessimism is despite several measures taken by the government and the central bank to address the real estate slowdown in India.

The Current Sentiment Index of real estate stakeholders in India has plummeted to 42 in July-September 2019 from 47 and 62 in the preceding two quarters, according to the latest survey by industry bodies Federation of Indian Chambers of Commerce & Industry and National Real Estate Development Council, and property consultant Knight Frank (India) Pvt. Ltd.

A score more than 50 indicates optimism and less than 50, pessimism.

This index has touched a "level previously seen during the heightened uncertainty period of pre-election in the first quarter of 2014 and the demonetisation period (41) in the last quarter of 2016", the Real Estate Sentiment Index Q3 2019 report said.

Further, Future Sentiment Index dropped to an all-time low of 49 in the third quarter of 2019. "The score is a clear indication that the sector is under pressure," the report said.

“The real estate stakeholders’ sentiment has gone in the pessimistic zone for the current quarter owing to poor demand-side performance, despite the plethora of measures by the government,” Knight Frank India’s Chairman Shishir Baijal said.

This is also the first time stakeholders are wary about the future six months for the real estate sector and the overall economy, he said.

While measures have been announced by the finance minister attempting to sort out the supply-side challenges, these steps are mostly focused on the affordable housing segment, leaving out the majority of non-affordable segment from the benefits, Baijal said.

"These measures have not helped infuse confidence in the stakeholders, as the real challenge lies in the demand-side story, where end users are unwilling to make home purchases owing to lack of financial confidence,” the Knight Frank chairman said. “The supply-side sops will not be enough till the time demand is revived by putting money in the hands of the consumer.”

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But the commercial real estate sector has remained steady, the report said. The outlook for supply of new office spaces remains strong for the next six months.

What the real estate sentiment index does

The objective of the real estate sentiment index is to capture the perceptions and expectations of industry leaders in order to gauge the sentiment of the real estate market.

It is based on a quarterly survey of key supply-side stakeholders, including developers, private equity funds, banks and non-banking financial companies and consultants. It aims to gauge market sentiments on questions pertaining to the economy, project launches, sales volume, leasing volume, price appreciation and funding.

The 22nd edition of the FICCI–NAREDCO–Knight Frank Real Estate Sentiment Index survey was conducted between in July-September 2019 and represents the views of over 200 industry stakeholders on the set parameters.

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