Real Estate Sector Expresses Cautious Optimism
Pune, February 07, 2019: Knight Frank India in association with National Real Estate Development Council (NAREDCO) and the Federation of Indian Chambers of Commerce and Industry (FICCI), today released the Real Estate Sentiment Index, which broadly captures the overall perceptions and expectations of industry leaders. The report is based on a survey of, besides others, over 150 stakeholders of the Indian real estate sector including leaders from the development and financial side. The survey indicates that for the next six months, the sector has a positive outlook on account of the stable policy environment post introduction of structural reforms implemented in 2017. Further, it notes that there is general optimism around the launches, with the hope of a gradual upward incline. The stakeholders have opined that the buyers are still in the wait and watch mode which will dampen sales. Future sentiments for price appreciation, however, remained marginally down, indicating that the sector does not expect any price rise in the coming six months.
ShishirBaijal, Chairman and Managing Director, Knight Frank, India said, “The real estate sector has shown signs of controlled optimism in the recent survey. A majority of respondents remained moderately positive towards the state of the economy for the next 6 months. However, it should be noted that the sentiments are in a decline compared to the previous periods of the survey. Based on our survey, the respondents expect the real estate sector to witness gradual growth in the coming six months. The future sentiments for both major asset classes, i.e. residential and office, are expected to be moderately positive. The stakeholders show positivity with regard to new residential launches on the back of increasing clarity of policy. Nevertheless, it is to be highlighted that the sentiment for pricing remains negative, implying an anticipation of the further decline in residential prices over the next 6 months.’
OVERALL CURRENT AND FUTURE SENTIMENT SCORE
FUTURE SENTIMENT SCORE
STAKEHOLDER SENTIMENT SCORE
RESIDENTIAL SECTOR LACKS CONFIDENCE
The real estate sentiment index is developed jointly by Knight Frank (India), the Federation of Indian Chambers of Commerce and Industry (FICCI) and National Real Estate Development Council (NARDECO). The objective is to capture the perceptions and expectations of industry leaders in order to gauge the sentiment of the real estate market.
METHODOLOGY: The real estate sentiment index is based on a quarterly survey of key supply-side stakeholders, which include developers, private equity funds, banks and non-banking financial companies (NBFCs). The survey comprises questions pertaining to the economy, project launches, sales volume, leasing volume, price appreciation and funding. Respondents choose from the following options, for which weights have been assigned: a) Better (100 points) b) Somewhat Better (75 points) c) Same (50 points) d) Somewhat Worse (25 points) and e) Worse (0 points). The index is determined by calculating the weighted average score of the percentage of responses in each of these categories. Hence, a score of 50 represents a neutral view; a score above 50 demonstrates a positive outlook; and a score below 50 indicates negative sentiment.
In order to present a holistic view of the real estate industry, the report is divided into two sections. Section A comprises two indices: the overall current sentiment index that indicates the respondents’ assessment of the present scenario compared to six months prior, and the overall future sentiment index that represents their expectations for the next six months. Section B focuses only on the future sentiments of the stakeholders. This survey was conducted between January–March 2019.
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