Indian Real Estate Market: Sentiments plummet

Indian Real Estate Market: Sentiments plummet

The IIMB Magicbricks Housing Sentiment Index (HSI) for the 3rd quarter of 2014-15 was sharply down across all 10 cities, ending the cautious optimism witnessed so far this year. Ahmedabad, Delhi and Gurgaon witnessed over 25% correction in sentiments compared to the previous quarter.

January 14 2015: The Housing Sentiment Index (IIMB-Magicbricks HSI) assessed by IIM Bangalore and Magicbricks, forecasts that homebuyers across all 10 cities surveyed expect real estate prices to drop over the next six months. The aggregate Housing Sentiment Index (HSI) measured across the 10 cities dropped sharply by 29% this quarter to 81. (An HSI score of 100 suggests the prices would remain static). The IIMB Magicbricks buyer sentiment survey includes the cities of Ahmedabad, Bengaluru, Chennai, Delhi, Gurgaon, Hyderabad, Kolkata, Mumbai, Noida and Pune.

“While there is an overall drop in consumer sentiments, the Indian real estate market continues to see robust demand for properties in the affordable range of Rs 20-40 lakh from end-users. Ease in minimum capital investment and reduction in minimum built area of projects to procure FDI is likely to address demand and keep the real estate market attractive in the medium to long-term” explains Sudhir Pai, Business Head, Magicbricks.

HSI Snapshot by City

City                 HSI      Trend

Ahmedabad      76        ↓

Delhi                  78        ↓

Gurgaon           80        ↓

Mumbai            81        ↓

Hyderabad       95        ↓

Chennai            97        ↓

Pune                 100      ↓

Bangalore         103      ↓

Kolkata             103      ↓

Noida                109      ↓

High inventory levels, soaring prices and circle/guidance rate increases were some of the compelling reasons for consumers’ pessimism.

Delhi witnessed a 32% drop in sentiments. The NCR has been plagued by stalled infrastructure projects, builders facing legal action, increase in circle rates by up to 20% in some regions and high levels of unsold inventory. Inspite of all this, developers are unwilling to bring down prices while consumers eagerly await interest rate reduction. 

Bengaluru witnessed a 17% drop in sentiments in addition to the 13% drop witnessed last quarter. Sentiment in Bengaluru, once soaring, is now down to neutral levels. Guidance Values for properties were revised upwards in November 2014, resulting in increased registration costs for buyers.

Ahmedabad witnessed high volatility in the past few quarters dropping by 33% to 76 as compared to a rise of 30% in the previous quarter.

The Seller Survey indicates that sellers continue to be bullish about markets with an HSI of 154. Of the sellers, 29% are doing so to book profits while 25% want a bigger accommodation and 49% are looking to sell apartments/flats.

Key TakeAways of the Oct-Dec 2014 Report

v  The National HSI plunged by 29% to 81 this quarter

v  All 10 cities witnessed a drop in sentiments with Ahmedabad and Delhi witnessing over 30% reduction

v  The Seller Index witnessed a marginal decline to post an HSI of 154

v  84% of respondents earn less than Rs 20 lakh per annum

v  47% respondents are looking for property below Rs 40 lakh

v  51% currently live in rented accommodation

v  47% look to buy property within the next 6 months

v  54% are waiting for prices to come down

v  66% prefer to purchase flats/multi-storey apartments

v  The average wait time decreased to 8.2 months from 9.1 months in the previous quarter

Summarising the findings, Uma Sitaraman, Lead Researcher, IIMB-Century Real Estate Research Initiative (CRERI) stated, “Inspite of high inventory levels in major cities, real estate prices continued to remain high. Registration costs are now higher in some states due to circle rate revisions. Real Estate as an asset class has underperformed the equity markets in the past year and needs a boost, both in terms of accelerated infrastructure development and reduction in interest rates.”

The complete IIMB Magicbricks HSI report is available for free download: ?

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