Real estate market sentiment drops to demonetisation-period levels: Survey

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Despite a slew of measures to arrest the slump by the government and the Reserve Bank of India (RBI) to boost liquidity and revive demand, current sentiments of the real estate stakeholders in India has plummeted to a level earlier seen during the 2014 pre-elections and demonetisation in 2016, a survey has said.

According to the latest survey by industry bodies FICCI and NAREDCO, and property consultant Knight Frank, the Current Sentiment Index of real estate stakeholders in India has plummeted to 42 in the July-September quarter from 47 and 62 in the preceding two quarters.

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.

The report further indicates that the future sentiment, or the outlook for the coming six months, has also turned ‘pessimistic’ for the first time since the inception of this survey, a clear indication that the sector is under immense pressure. However, sentiments toward the commercial real estate sector have remained steady, with the outlook for the new office supply strong for the coming six months.

A score of over 50 signifies ‘Optimism’ in sentiments, a score of 50 means the sentiment is ‘Same’ or ‘Neutral’, while a score of below 50 shows ‘Pessimism’.

The real estate stakeholders sentiment has gone in the pessimistic zone for the current quarter owing to poor demand side performance, despite plethora of measures by the governmentHowever, it is more significant to note that, for the first time, the stakeholders are wary regards the future six months for the real estate sector and the overall economy, thus pushing the sentiment score in the red,” said Shishir Baijal, Chairman and Managing Director of Knight Frank India.

While measures have been announced by the Finance Minister in this quarter attempting to sort out the supply side challenges, however these measures are mostly focused on affordable housing segment, leaving out the vast majority of nonaffordable from the announced benefitsThese measures have not helped infuse confidence in the stakeholders, as the real challenge lies in demand side story, where end users are unwilling to make home purchases owing to lack of financial confidenceThe supplyside sops will not be enough till the time demand is revived by putting money in the hands of the consumer and his confidence is restoredhe said.

The future sentiment score for the real estate sector’s performance in the north zone continues to be in the pessimistic zone (48) for the second consecutive quarter in 2019, though marginally improving from the preceding quarter of Q2 2019.

This north zone’s crisis contagion has rubbed off on the west zone as well, with its sentiment score going in the ‘red’ for the first time. The future sentiment score in the west has been on a constant decline since Q4 2018 (62) and is the lowest (45), the report said.

The 22nd edition of the FICCI-NAREDCO Knight Frank Real Estate Sentiment Index survey was conducted between July-September 2019 (Q3 2019) and represents the views of over 200 industry stakeholders on the set parameters.