The slump witnessed in real estate sector seems to have percolated in other industries as well. With Indian household saving dipping to decade-low point, overall economy seems to be under a gloom. And the scenario seems to be impacting real estate sector as well.
As per quarterly report exploring the market sentiment, Real Estate Sentiment Index by FICC-NAREDCO-Knight Frank, the current sentiment score has taken a nosedive in the second quarter of 2019. The score indicates that the stakeholders have gone on the backfoot in the second quarter of 2019 owing to the overall economic slowdown.
Real estate sentiment score is based on key supply-side stakeholders, which include developers, private equity funds, banks and non-banking financial companies (NBFCs), who are surveyed on questions pertaining to the economy, project launches, sales volume, leasing volume, price appreciation and funding. A score of 50 represents a neutral view; a score above 50 demonstrates a positive sentiment; and a score below 50 indicates negative sentiment.
Real Estate Sentiment Index Q2 2019 score is 47. Not only that, future sentiment score has also taken a hit in Q2 2019 with the score dropping to 52 compared to 63 in Q1 2019. Though future sentiment score is in positive zone, both current and future score has witnessed a sharp dip as compared to preceding quarters.
Weak demand, inventory overhang, developer defaults coupled with the worsening of the NBFC crisis has dried up funding for the sector, which in turn has increased the borrowing cost and impacted finances for the already strained sector. In the current scenario, stakeholders meaning to do good business are also finding it tough to convince lenders.
The worst affected region is NCR where current sentiment index score is 42. The region is anyway baffling with inventory pressure, weak demand and low buyers’ confidence. The recent developments like Supreme Court’s decision to cancel the license, RERA id and property lease of Amrapalli has come across as stern action for developers who are holding themselves back to launch new projects.
Residential sector seems to worst affected. As per Real Estate Sentiment Index Q2 2019, majority of stakeholders believe that the residential sales will remain tepid or may even go down further in the coming six months while prices will continue to remain muted.
On the contrary, sentiment in commercial real estate especially office segment is up and in high spirits. Almost 83% of respondents from the survey believe that the next six months will see new supply additions and market and will continue its momentum in key office markets across the country. Their outlook for future rental appreciation also remains upbeat with 86% of the stakeholders expecting rents to either remain stable or inch upwards in quality office space in key locations due to limited options.
Here is complete Real Estate Sentiment Index Q2 2019 report.
Read more such real estate reports.