Real estate players optimistic of revival

“As per the stakeholder survey, not just supply and demand for residential property, but also price is expected to witness an upward movement during the next six months”
While key stakeholders including developers, private equity funds, banks and NBFCs believe that the present residential and office markets are comparatively weaker than what they were six months back, they are optimistic about the economic scenario and expect improvement in the next six months, revealed the maiden real estate sentiment index jointly developed by industry body FICCI and London-based realty consultant firm Knight Frank India.
The survey which was conducted during October-November 2013 captured the supplier side perspective on the real estate market condition across top seven markets in the country. Apart from National Capital Region (NCR) and  Mumbai Metropolitan Region (MMR), the survey also considered major cities i.e. Pune, Chennai, Bengaluru, Hyderabad and Kolkata to represent the Indian real estate scenario.
The index showed that current sentiment is pessimistic across all zones. However, respondents from the east and south are slightly more optimistic about the future compared to the other zones and expect the real estate development to remain stable.
While the index showed that there is an evident optimism for the residential sector in terms of launches, sales volume or price appreciation in the coming six months; office sector on the other hand is expected to be pessimistic in the coming two quarters. Also, credit lending or funding situation appears worse now compared to six months back and is not expected to improve in the near future.
According to the sentiment index, Mumbai and Pune are forerunners in price appreciation during 2009-2013. Pune showed the maximum appreciation amongst the IT and ITeS driven markets of Bengaluru, Hyderabad and Chennai. It said, though the NCR market prices trended downwards till the end of 2010, they have risen more than any other major residential market in India. However, Hyderabad has substantially underperformed compared to other markets.
The report also pointed out that project launches, absorption and office space leasing volume peaked in 2010 post the Global Financial Crisis (GFC) and have been trending down since then.
OutlookAccording to the FICCI-Knight Frank India real estate sentiment index, notwithstanding the economic risks associated with the election code of conduct and impending election, stakeholders expect an economic expansion during the next six months. However, Shishir Baijal, Chairman and Managing Director, Knight Frank India believes, “Political compulsions will supersede any economic urgency leading to a delayed economic expansion during this period.”
Dr. Samantak Das, Chief Economist and Director-Research, Knight Frank India said, “As per the stakeholder survey, not just supply and demand for residential property, but also price is expected to witness an upward movement during the next six months. However, if an analogy is drawn with the 2009 general election period, the determinants of housing demand are strikingly different this time around. Property prices have risen faster than the growth in household income or general inflation during this period. Interest rates are much higher. Lack of any meaningful improvement in determinants of housing demand, according to us means the situation will remain the same.”
“As business growth and employee addition remain weak in the economy, larger project completions at this time will lead to higher vacancy levels in the Indian office market,” claimed Rajiv Piramal, Co-Chair, FICCI Real Estate Committee and VC and MD, Peninsula Land Ltd.

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