KEY FINDINGS OF THE SENTIMENT INDEX SURVEY
Current sentiment score
- The current sentiment score has revived in Q4 2019, inching up to 53 and getting back in the optimistic zone after two consecutive quarters.
- A recovery in the current sentiment score hints that the stakeholders are cautiously optimistic as they keep a close watch over the implementation of the slew of measures undertaken by the government to revive the sector.
- Improvement in the current sentiment for the sector is also in line with recent improvement in some macro-economic indicators. For instance, Purchasing Manager Index (PMI) for the services and manufacturing sector improved meaningfully in December 2019. Cement sector growth improved to 4.1% in November 2019 after contracting in the previous 3 months.
Future sentiment score
- The future sentiment score that had gone in the red for the first time in the preceding quarter of Q3 2019 has bounced back to 59 in Q4 2019.
- Though in the optimistic zone now, the outlook of stakeholders remains cautious with a majority of them opining that the market will remain at the same levels and not go down further in the coming six months.
- The real estate sector has been under pressure for over three years now. 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.
“The real estate sector sentiments have shown improvement in its current as well as expected outlook for the market in Q4 2019. This optimism is significant in the wake of the continued downslide in India’s overall economic performance. Even while the sector is working towards finding its balance, especially in the residential segment, steps by the government have kept the sector stable in 2019. However, we expect the market to remain cautious and sensitive to even the smallest change as large-scale demand is yet to pick pace,” said Shishir Baijal, Chairman and Managing Director of Knight Frank India.
Shishir further said, “The sector’s optimism is far pronounced for the office sector, which has been growing strength to strength in the past few years, reaching historic highs in 2019. In the next 8 – 10 quarters, if the office, other commercial including retail, warehouse and logistics and the residential sector continue to show positive growth, despite the pace of growth of Indian economy, we can expect the real estate sector to show upward curve of revival. The sector, therefore, needs to start making adequate safeguards to ensure that the demand for all segments stays positive.”
