Sector outlook slips to ‘Pessimistic’: Knight Frank – FICCI - NAREDCO Real Estate Sentiment Index Q2 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.

KEY FINDINGS OF THE SENTIMENTINDEX SURVEY

• 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.
• 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 ‘pessimistic’ outlook of stakeholders of real estate have only reiterated the current negative growth conditions that the sector is staring into. The economic slowdown, which has moved well beyond real estate into segments like auto, FMCG and FMCD, is firmly establishing a slowdown in buyer sentiments, indicating further delay in end user purchase decision. The real estate sector in specific has been witnessing tough sales environment which is only expected to continue.” said Shishir Baijal, Chairman and Managing Director of Knight Frank India. Shishir added further, “The government has started to take remedial measures to boost overall liquidity in the market to help increase sales volumes across industries. We hope that comprehensive steps, like those taken to boost affordable housing, will be taken by the government in the near future to uplift the entire real estate segment.” Dr. Niranjan Hiranandani as a National President of apex real estate body NAREDCO flags off the alarming concerns of the sector by voicing that, The deepening economic slowdown compounded with subdued investment outlook and sluggish consumption appetite have hampered the GDP growth traction. Liquidity being the oil of the India’s growth engine needs a quick fix resolution enabling Indian Real estate to play its role in enhancing GDP growth in tandem with ample job creation. As known globally, real estate and infrastructure development have proved to be the economic drivers, Indian stands no different. Hence, the quick line of action from Central Government and apex regulatory bodies will be paramount in easing the pessimistic scenario looming over the sector for a positive out growth, he concluded. “Global geopolitical headwinds and slowdown in domestic consumption are currently weighing down the Indian economy. India Incorporation at large is feeling some stress. To cope up with consumption slowdown, more policy support and private capex is vital to bring growth impetus to the economy. The Government needs to ensure that there is a stable business environment and no more disruption takes place, which causes short term setbacks and industry can afford any more. However, India’s growth story is intact from a long-term perspective. The public investment will bring job opportunities and revive the consumption engine. Economic security would be the key to kick start the real estate segment.” said Sanjay Dutt, Chairman, FICCI Real Estate Committee and Managing Director & CEO, TATA Realty and Infrastructure Ltd.