by Suman Gupta
Mumbai, 13 August 2019: In the latest survey by Knight Frank – FICCI – NAREDCO – ‘Real Estate Sentiment Index Q2 2019’, Indian real estate stakeholders have downgraded the current period outlook for the ongoing six months to ‘Pessimistic’, indicating no improvement in the level of on-ground activities for the sector. In sharp contrast to the preceding quarters, the overall current sentiment for the real estate sector has been rated at 47 points for the period April – June 2019. The overall slowdown in the economy, coupled with factors like the NBFC crisis, developer defaults and bankruptcies, have slackened the sentiments of the sector, especially for the residential segment. The situation is further compounded by factors like the ongoing liquidity crisis and a diminutive demand scenario. The outlook for the next six months was scored at 52, just above the neutral line. Stakeholders, while showing moderate optimism, are still cautious in their expectations on account of an overall economic slowdown that is impacting the real estate sector.
The sentiments, however, reversed for the office sector where the stakeholders’ outlook remains positive and both leasing and rents which are expected to be on an upward swing in the coming six months.
DIP IN OVERALL SENTIMENTS – UNCERTAINTY LOOMS LARGE OVER THE REAL ESTATE SECTOR
KEY FINDINGS OF THE SENTIMENTINDEX SURVEY
pan style=’font:7.0pt “Times New Roman”‘> The future sentiment score has taken a hit in Q2 2019 with the score dropping down to 52 compared to 63 in Q1 2019. Though remaining in the positive zone, the dip in the score indicates that the stakeholders are exercising caution to give a thumbs up to the sector in the coming six months.
pan style=’font:7.0pt “Times New Roman”‘> 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.
ZONAL SENTIMENT SCORE – NORTH GOES IN RED, WEST TRIMS OUTLOOK
Adversely affected by the inventory pressure, weak demand and low buyer confidence, the future sentiment score for North India has gone in the pessimism zone in the second quarter of 2019 while stakeholders in West India have also lowered their outlook for the next six months, which is in sync with the overall slowdown in the market sentiment.
Score>50: Optimism; Score=50: Same/Neutral; Score<50: Pessimism
STAKEHOLDER SENTIMENT SCORE – DEVELOPERS WARY, LENDERS EXERCISE CAUTION
Score>50: Optimism; Score=50: Same/Neutral; Score<50: Pessimism
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The sentiment score of the developers and the financial institutions regards the real estate scenario for the coming six months has significantly plummeted in Q2 2019. The worsening NBFC crisis has hit the real estate sector in full force resulting in dried up credit line to the already cash-strapped developers.
pan style=’font:7.0pt “Times New Roman”‘> Financial institutions have moved into the ‘pessimistic’ zone at 48 while developers remain just over neutral at 52 mostly guided by the growth in affordable housing
SLOWDOWN IN ECONOMY AND CAUTIOUS FUNDING ON THE CARDS
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74% of the stakeholders have opined that the economic situation will be the same or may even worsen in the coming six months showing low confidence on market situation to be able to elevate the current situation.
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A slowdown in consumption, lower investment and tightening of borrowing ecosystem has further compounded to negativity in outlook. Global rating agencies including International Monetary Fund (IMF), DBS Bank and Asian Development Bank (ADB)have lowered India’s GDP outlook.
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53% of the stakeholders have opined that the funding scenario may worsen in the next six months with lenders exercising caution in lending to sectors such as real estate, automobile and other consumption driven sectors.
