After staying in pessimistic zone for two consecutive quarters, the 23rd Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index Q4 2019 survey revealed the current real estate sentiment to have revived in the country and is in the optimistic zone of 53 in the October to December quarter of 2019 (Q4 2019). The Real Estate Sentiment Index conducted by Knight Frank FICCI NAREDCO is based on a quarterly survey of key supply-side stakeholders which include developers, private equity funds, banks and Non-Banking Financial Companies (NBFCs). 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 report further indicates that the future sentiment score, that had gone in the red for the first time in the preceding quarter of Q3 2019, has also bounced back to 59 in Q4 2019. Though in the optimistic zone now, the qualitative outlook of remains cautious, with a majority of stakeholders opining that the market will remain at the same levels and not go down further in the coming six months.

Positive Sentiment in North India

The implementation of RERA and GST have brought respite and helped developers in aligning their business. This is leading to the rapid consolidation and filtering of the market in Gurugram in Haryana, Noida and Greater Noida in Uttar Pradesh, which forms the major portion of the real estate sector of the Delhi and the National Capital Region.

Along with this, the creation of the INR 250 billion stressed asset fund (AIF), has brought back some confidence in the stakeholders of the region, as it would help provide the last mile funding to various stuck projects in NCR.

The Office Market Emerged as the Bright Spot

Outlook about the office market for the coming six months remains on the positive side, which also corroborates with the current market trends. The office market clocked an all-time high transaction of 5.6 mn sq. m (60.6 mn sq. ft.) in 2019, signalling the robustness of the market. The future sentiment score concerning the leasing activity is robust with 88% of the stakeholders being of the opinion that leasing activity will either improve or remain the same.

Continuing the positive momentum, a majority of the stakeholders are optimistic that new supply will enter markets across geographies. According to Knight Frank Research the supply momentum stayed strong in 2019 as close to 5.7 mn sq. m (61.3 mn sq. ft.) of office space was delivered during the year. 91% of the stakeholders expect rents to either remain at the current levels or increase in significant office markets.

Residential Market Outlook Shows Recovery

According to the survey, 74 percent of the stakeholders have shown an optimistic outlook for the upcoming six months maintaining that residential sales will either improve or remain the same but will not go down further. About 79 percent of the stakeholders were of the opinion that residential prices will remain at the same levels or drop further in the coming six months.

A slew of measures announced by the government like AIF for last mile funding of affordable housing, rationalisation of GST rates, along with liquidity support to HFCs and NBFCs have acted as a shot in the arm for the sector, but the survey suggests that more targeted solutions are required to further revive the sentiments and invigorate demand.

Confidence in Developers Revived

Confidence of the developers has also revived in the last quarter of 2019 on the back of government interventions.  Developers have welcomed government intervention while on the other hand lenders remain vigilant. Over the past two years the real estate sector has witnessed structural changes that have transformed the dynamics of the sector.

Sentiment Regarding the Economy Has Remained Cautious

The real estate industry’s sentiment regarding the economy has remained cautious in the fourth quarter of 2019. While 35% of the stakeholders opine that the overall economic situation will be the same in the coming six months, 37% are of the opinion that the trends will get better. The survey findings suggest that the stakeholders feel that the flow of funds to the sector will improve in the coming six months.

Source: https://content.knightfrank.com/research/590/documents/en/knight-frank-ficci-naredco-india-real-estate-sentiment-index-real-estate-sentiment-index-q4-2019-october-december-2019-6898.pdf

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