Of all the stakeholders, 67% maintained that given the weak demand due to a cautious sense on the overall economy, stagnant job market and the apprehension to spend, residential sales will either remain tepid or may even go down further in the coming six months.
Market sentiment in the real estate sector has fallen to the levels seen during demonetisation, as investors continue to be cautious on the back of an overall economic slowdown. Given the weak outlook on growth and job creation, residential sales are expected to either remain tepid or may even go down further in the coming six months.
According to a survey by Knight Frank–FICCI–NAREDCO, ‘Real Estate Sentiment Index Q3 2019’, shows that the current sentiments of the real estate stakeholders in India has plummeted further to 42 in the July-September quarter of 2019 (Q3 2019) from the preceding quarter — 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. According to the rating methodology, a score above 50 indicates a positive view and a score below 50 indicates a negative view.
Various supply-side and demand-side measures taken by the government have not been able to instill the required confidence, which has led to further downgrading of the current score, according to the report. Measures such as slashing the corporate tax rate to 22% and providing liquidity support to housing finance companies (HFCs) by sanctioning Rs 30,000 crore through the national housing bank (NHB) are some measures that have not borne fruit.
Of all the stakeholders, 67% maintained that given the weak demand due to a cautious sense on the overall economy, stagnant job market and the apprehension to spend, residential sales will either remain tepid or may even go down further in the coming six months. Sentiment regarding residential price appreciation also looks grim, with 86% of the stakeholders opining that prices will remain at the same levels or even drop further in the coming six months.
Taking cognizance of the slack in the sector, the RBI has cut the repo rate by 25 basis points for the fifth consecutive time in the year, effectively bringing down the repo rate by an aggregate of 135 basis points. However, stakeholders have expressed concern on the effective transmission of this rate cut to retail consumers in the form of discounted credit.
JC Sharma, chairman and managing director (MD), Sobha, said, “Looking at the current scenario where the sentiments are low, the demand is tepid, liquidity is a challenge and interest rates are still high, we believe the government can do more.”
The crisis that was triggered by IL&FS has led credit flow drying up to the commercial sector, especially real estate. Since the default of the NBFC, the number of developers being forced into insolvency proceedings has more than doubled to 421, according to the report. Furthermore, the sector further faces the problem of lack of demand. “Within the residential spectrum, the stress has mounted up on the high-end segment in the recent period and that is one segment where sales have been slow,” said Keki Mistry, vice-chairman and CEO, HDFC. “The agenda of driving consumption and reviving the economy could be well served by giving a further boost to the real estate sector through regulatory and other intervention.”