ABB Real Estate Sector May2009 (1)

7/31/2019 ABB Real Estate Sector May2009 (1)

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ASSOCHAM

BUSINESS

BAROMETER

Survey on:

Flowing Sentiments in the Real Estate Sector

May 2009

Prepared by:

GAURAV SHARMA

ASSOCHAM RESEARCH BUREAU


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Affordable housing topped with improved cash flows would recover the real

estate sector in coming three months: Assocham Survey

Anticipating strong policy measures for the real estate sector in the upcoming budget, embattled

realty majors see positive signs of recovery taking place within next three months as affordable

housing rev up demand and improved cash flows address their liquidity concerns, according to an

ABB Survey.

The Assocham Business Barometer (ABB) Survey titled Flowing Sentiments in the Real

Estate Sector, based on an expert (focus) group of 25 real estate firms, found 88 per cent of the

respondent CEOs sensing a quick revival in the sectoral activity within next three months as

developers strategic shift towards affordable housing and a significant price correction in the

housing projects has pepped up the sale of residential property.

As per the Survey (conducted between May 15 25, 2009), a whopping 92 per cent of the

respondent developers considered affordable housing as the most dominating segment to shore up

the demand in real estate sector. The policy actions supplementing the robust demand in the

housing sector is likely to hold the key for a speedy recovery phase in the sector.

With developers concentrated efforts to target the lower and middle income consumer group

during the downturn, 84 per cent of the surveyed CEOs signaled the least impact (in terms of

demand contraction) in the affordable housing segment.

According to the Survey, at a time when luxury housing (more than 50 per cent), SEZ (40 50

per cent), retail space (30 40 per cent) and commercial space (20 30 per cent) were witnessing

steep contraction in demand, affordable housing was the single most resilient segment with a

minimal contraction of zero to ten per cent.


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On the policy front, the surveyed CEOs sought single window clearances for all schemes under

affordable housing in the line of SEZ clearances to enable fast development of units and achieve

the short fall of about 26 million houses at the earliest.

A majority of 76 per cent of the ABB respondents viewed the stimuli given to the sector through

fiscal and monetary measures as inadequate to help boost the demand-supply scenario. However,

of all the measures taken by the RBI and the commercial banks, 64 per cent of the respondent

CEOs were of the view that RBIs allowance to banks to restructure loans to developers has been

the most successful in improving the liquidity for real estate sector.

In the present market scenario, 60 per cent of the surveyed CEOs perceived resurgent stockmarket as the most prominent source of finance to fund the sectors cash requirement, followed

by 28 per cent viewing bank credit as the best viable option.

Hefty funds raised through QIPs in the stock market (exceeding Rs 8,000 crore) along with debt

restructuring would allow the developers to manage their cash flows even more efficiently to

address their liquidity concerns.

Almost 92 per cent of the respondent CEOs strongly agreed to the need to unify stamp duty on

property across all the Indian States. The surveyed developers also sought reduced stamp duty

charges to increase revenue and avoid duty evasion.

Among other policy issues, respondents asked for a central regulation body, recognition of real

estate sector as industry, further relaxed norms for ECB and FDI along with a need for speedier

and hassle free statutory approvals.

The Survey also found that metropolitan cities has been the worst affected market segment

whereas tier II cities have been seen as the most promising one to boost up the sector as

commercial activity moving to these cities and their greater yield has given a tremendous impetus

to investment in the these market segments.


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Among the six metropolitan cities, the financial capital of India, Mumbai, has been ranked first as

the most saturated in terms of real estate assets (both commercial and residential) followed by

Delhi NCR (second) and Bangalore (third) whereas Chennai, Kolkata and Hyderabad were ranked

fourth, fifth and sixth respectively.


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ENCLOSURE:

Assocham Business Barometer (ABB) Survey on Real Estate Sector

The Indian real estate sector plays a significant role in the country's economy. The sector

contributes heavily towards the gross domestic product (GDP). Almost five per cent of the

country's GDP is contributed by the housing sector. The real estate sector is also responsible for

the development of over 250 ancillary industries such as cement, steel, paints etc.

Feeling the pain of global recession and downturn in the Indian economy, real estate has been

among the worst affected sectors to witness significant upheavals amid serious policy changes inthe recent past.

Taking stock of the market dynamics flowing into the real economy, Assocham Research Bureau

is undertaking an expert (focus group) survey on the prevailing sentiments pertaining to the real

estate sector regarding the inherent industry led demand-supply factors, market segmented

scenario according to tier/income classification and the policy measures announced by the RBI

and government.

The questionnaire consists of 15 questions divided into three sections as under:

S.No. Section No. of Questions

1 General Market-Led Factors 5

2 Segmented Market Scenario 5

3 Policy Measures 5

Total 15

You are kindly requested to spare your precious time to be a part of the Survey and revert back

with your responses before May 25, 2009. The results of the survey would be used for an

Assocham Business Barometer Study on Indian real estate market indicating the sentiments

flowing in the sector.


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RESPONDENTs DETAILS

Name: ____________________________________________________

Designation: ____________________________________________________

Organization: ____________________________________________________

Contact Details: ____________________________________________________

Please Note: As your response would form a part of the recommendations to be made to the

government, we assure you high degree of confidentiality about respondents identity would be

maintained.


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SECTION- I: GENERAL MARKET-LED FACTORS

Q1. You expect the real estate market revival to take place within __________?

A. 0-3 monthsB. 3-6 monthsC. 6-12 monthsD. More than 12 months

Q2. The price correction of real estate properties has led to a __________ rise in demand

A. HealthyB. Moderate - HealthyC. ModerateD. Weak ModerateE. Weak

Q3. i) How much demand contraction was visible during downturn of the real estate sector in the

following market segments? (Kindly tick your response)

Market Segment Reduction in demand (in %)

0-10 10-20 20-30 30-40 40-50 More than 50

Affordable Housing

Luxury Housing

Commercial Space

Retail

SEZ


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ii) Which of the following would be the most dominating segment to revive the demand

scenario in the real estate sector?

A.

Affordable housingB. Luxury HousingC. Commercial property spaceD. RetailE. SEZF. Any Other __________________________

Q4. Which among the following is the most dominating factor which has led to an

improvement in the absorption rate?

A. Price correction (drop in the per sq ft rate)B. Reduction in unit sizesC. Promotional packages offeredD. Any Other ___________________________

Q5. In the present market scenario which is the most prominent source of finance to raise

capital to fund the sectors cash requirement?

A. Bank CreditB. Private EquityC. Stock MarketD. Any Other ___________________________


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SECTION-II: CATEGORIZATION OF MARKET SEGMENTS

Q6. Which of the following market segment witnessed the maximum impact of the slowdown

in the sector?

A. Metropolitan citiesB. Tier II citiesC. Tier III cities

Q7. Which of the following market segment you see as the most promising one to boost up the

real estate sector?

A. Metropolitan citiesB. Tier II citiesC. Tier III cities

Q8. Which among the following factors has given the maximum impetus to investment in the

Tier II and Tier III cities?

A. Commercial activity moving to the tier II and tier-III citiesB. Higher property prices in tier IC. Greater yield of tier II and tier-III citiesD. Any Other ________________________

Q9. Which among the following targeted consumer group would contribute the maximum

share (in volume terms) in your real-estate portfolio for the next 2-3 years?

A. Low Income Group (LIG)B. Middle Income Group (MIG)C. High Income Group (HIG)


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Q10. i) How saturated do you find the real estate assets in metropolitan cities? (Kindly tick your

response)

Degree of SaturationCity

Low Low-Medium Medium Medium-High High

Delhi NCR

Bangalore

Mumbai

Chennai

Kolkata

Hyderabad

ii) Which Metropolitan city you think would witness the highest growth in its real estate

market for FY 2009-10?

A. Delhi NCRB. BangaloreC. MumbaiD. ChennaiE. KolkataF. Hyderabad


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SECTION-III: POLICY MEASURES

Q11. Stimuli given to the sector through fiscal and monetary measures has been adequate to

help boost the demand-supply scenario?

A. YesB. No

Q12. Do you think there is still some scope for monetary easing by RBI before its monetary

policy review for Q1 FY 2009-10?

A. AgreeB. Strongly AgreeC. Neither agree nor disagreeD. DisagreeE. Strongly Disagree

Q13. Which of the following measures taken by RBI and commercial banks has been the most

successful in improving the liquidity for real estate sector?

A. RBIs allowance to banks to restructure loans to developersB. Reduced risk weightage on real estate loans to 100 % from 150 %C. Reduction in Repo rate/PLRD. Higher growth in Housing creditE. Any Other _______________________


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Q14. In which of the following, investment norms needs to be further relaxed to improve on

sectors liquidity requirement?

A.

Foreign Direct InvestmentB. Real Estate Mutual Funds / Real Estate Investment TrustsC. External Commercial BorrowingsD. Any Other _______________________

Q15. There is a need to unify stamp duty on property across all the Indian States?

A. AgreeB. Strongly AgreeC. Neither agree nor disagreeD. DisagreeE. Strongly Disagree


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What further steps you think the policy makers need to take to revive the real estate sector?

We greatly appreciate and value your time for filling up the questionnaire.

Thanks and Regards

Gaurav Sharma

Assocham Research Bureau

ABB Real Estate Sector May2009 (1)

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