Indian real estate markets in caution mode: IIM Bangalore, MB HSI report

Written by FE Online | New Delhi | Updated: Oct 31 2014, 00:24am hrs
Realty SectorThe IIMB Magicbricks Housing Sentiment Index (HSI) for the 2nd quarter of 2014-15 reveals that home buyers continue to expect prices to rise across the country.
Sentiments in Ahmedabad have hit new highs while Bangalore takes a break from the steadily rising sentiments to drop for the first time in a year. The IIMB Magicbricks Housing Sentiment Index (HSI) for the 2nd quarter of 2014-15 reveals that home buyers continue to expect prices to rise across the country. But the bullish sentiments seem to be waning from the peak seen soon after the elections last quarter.

The Housing Sentiment Index (IIMB MB HSI) assessed by IIM, Bangalore and Magicbricks forecasts that homebuyers across 10 cities surveyed expect real estate prices to rise over the next six months. The aggregate Housing Sentiment Index (HSI) measured across 10 cities dropped marginally by 4 per cent this quarter to 114. (An HSI score of 100 suggests the prices would remain static). The IIMB Magicbricks buyer sentiment survey includes the cities of Ahmedabad, Bangalore, Chennai, Delhi, Gurgaon, Hyderabad, Kolkata, Mumbai, Noida and Pune.

"The Indian real estate consumer is still in the wait and watch mode. While there is active interest in the market, evinced by the time spent by consumers on Magicbricks searching for houses, the consumer still expects prices to hold for at least six months and is willing to wait to buy," explains Sudhir Pai, Business Head, Magicbricks.

HSI Snapshot City-wise:

IIM Bangalore

Although sentiments in 8 out of the 10 cities dropped Q/Q, the general optimism prevails with all 10 cities posting positive sentiments.

Sentiments in Ahmedabad soared by 30 per cent and can be attributed to govt policies that led to mushrooming of various industries.

Bangalore, for the first time in a year, registered a drop in sentiment. HSI for Bangalore dropped by 13 per cent to 124. Although respondents are still positive, the soaring cost of housing and shortage of affordable housing is taking its toll on sentiments.

Pune was the only other city, other than Ahmedabad, to register higher sentiments this quarter. HSI rose by 5 per cent to 131, making Pune the highest sentiment scorer. Infrastructure developments across the city led to Pune becoming an attractive residential market.

Hyderabad posted an HSI of 104, a drop of 12 per cent as compared to the previous quarter. Sentiments have been very volatile after the division of the state.

The Seller Survey indicates that sellers continue to be bullish about markets with an HSI of 159. Of the sellers, 36 per cent are doing so to book profits while 27 per cent want a bigger accommodation. Of the respondents, 50 per cent sellers are looking to sell apartments/flats.

Highlights

The National HSI decreased by 4% to 114 this quarter

All 10 cities posted positive sentiments

The Seller Index witnessed a marginal decline to post an HSI of 159

Of the respondents 83 per cent earn less than Rs 20 lakh per annum

Almost 50 per cent are looking for property below Rs 40 lakh

Nearly 53 per cent currently live in rented accommodation

Of the respondents 44 per cent look to buy property within the next 6 months

Over 41 per cent time their property purchase based on market conditions

Almost 67 per cent prefer to purchase flats/multi-storey apartments

Summarising the findings, Uma Sitaraman, lead researcher, IIMB-Century Real Estate Research Initiative (CRERI) stated, "With the economy expected to perform better, effective policies in the housing sector will ensure positive sentiments translate into actual purchase."