Post demonetisation and structural reforms, business sentiment in the real estate sector has hit the lowest levels of optimism, especially in the northern and western markets of the country and the next 12 to 18 months are likely to be the ’under observation’ period for the sector, the latest findings by FICCI-NAREDCO-Knight Frank India Real Estate Sentiment Index for Q3 2017 (June-September 2017) have revealed.

The residential sector, which decides the trajectory of the real estate industry in the country, is likely to be under continued pressure for the next six months. The office market is relatively better off with a majority of the stakeholders opining either a steady or improving leasing environment, it says.

The future sentiment score in the third quarter of 2017 (55) has reached its lowest point over the past 39 months indicating a significant decline in optimism pertaining to the sector’s future performance. This also indicates that the true impact of demonetisation and structural reforms such as RERA and GST have finally sunk into the industry, it says.

As per the index, the National Capital Region falls flat, western region slips further while other regions hold on. Hit by prolonged crisis in the National Capital Region (NCR), one of the largest real estate contributors in the northern zone, the north region recorded the lowest future sentiment score of 41. The future sentiment score in the western zone (53) has been on a constant decline and lowest over the past 39 months in the third quarter of 2017.

Real estate sector also starts to lose hope on the economic front. Only 51 percent of the stakeholders have opined that the economy will be better in the coming six months as against 62 percent in the second quarter of 2017. Only 49 percent of the stakeholders have said that the funding scenario will be better in the next six months as opposed to 67 percent in the second quarter of 2017.

Majority of the stakeholders feel that the residential launches and sales are either likely to worsen in the next six months or hold steady at their current level, which itself is abysmally low. As many as 73 percent of the respondents have opined that the residential price appreciation will either worsen or remain the same in the coming six months.

Office market to remains steady. The office market is showing a much better future trend than the residential sector in the third quarter of 2017. Majority of the stakeholders foresee the office market to either improve or maintain the present levels over the next six months. Nearly 82 percent of the respondents opine that office rental will either remain the same or would move up in the coming six months.

"Business sentiments in the recent history of real estate in India have hit the lowest levels of optimism. While sentiments are largely transient in nature, the prevalent mood in the industry reflects that it has finally come to terms with the short-term adverse impacts of the structural reforms that became a reality over the past 12-odd months. There is also an evident slowdown in the economy with a steady decline in business performances and the dwindling of capital expenditure to worrisome levels. Going forward, I feel that the next 12 to 18 months are likely to be the ’under observation’ period for the real estate sector. Industry stakeholders should spend the period in reorienting businesses in line with the new order," said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

 08 Nov 2017, 12:40 PM