RE Sentiment Index FICCI KnightFrank Feb2014

8/18/2019 RE Sentiment Index FICCI KnightFrank Feb2014

1/11

FICCI-Knight Frank

REAL ESTATE

SENTIMENT

INDEx

Q4 2013The real estate sentiment index is jointly developed by FICCI

and Knight Frank India. The objective is to capture the

perceptions and expectations of the industry leaders in

order to judge the sentiment of the real estate market.


2/11

FOREWORDSlow and steady wins the race -

a saying that holds true for the

Indian economy which has

gradually positioned itself as a

preferred business destination.

Giving fuel to this growth, has

been the real estate sector which

despite facing hurdles at every

nook and corner has certainly

played the role of an activecatalyst.

But it’s time we break loose of the usual practice of

analyzing real estate merely from the perspective of

customers, and adopt a wider frame to include other major

players of the game - the supply side stakeholders that

include developers, contractors, financial institutions, funds

to name a few and gauge their sentiments with the help of

structured and robust survey findings.

Therefore, I take this opportunity to present India’s first of its

kind real estate sentiment index report in association withthe Federation of Indian Chambers of Commerce & Industry

(FICCI) which aims at bringing to light the thoughts, beliefs

and expectations of the supply side stakeholders that

together determine the health of the real estate sector.

This quarterly report is an attempt to bridge the gap between

the supply and demand side and bring them onto a common

platform.

Hope you find this report useful and relevant.

I would love to hear back from you.

Shishir Baijal

Chairman & Managing Director

Knight Frank India

FICCI-Knight Frank

REAL ESTATE

SENTIMENT INDEx

Q4 2013

Real Estate sector has undergone

unprecedented change in the last

two decades and has been at the

forefront of the Indian

Government’s agenda on account

of its potential to propel economic

growth significantly. It is one of the

fastest growing sectors and

constitutes about 11 per cent of the

GDP. Across all its segments, be itresidential, office space or

commercial, there has been enhanced development activity

driven by growth of various sectors of the Indian economy.

Real Estate markets are highly susceptible to sentiments

and plays a very significant role in the decision making

process of investors, developers and consumers. The jointly

developed FICCI-Knight Frank sentiment index aims to

capture the perceptions and expectations of real estate

leaders, helping them gauge the market sentiments. This

sentiment tracker would be a ready reckoner for the

stakeholders of this industry to gauge the pulse of realestate industry leaders.

I would like to thank all those who have participated in the

survey and expressed their views. I hope this initiative is a

step forward in bringing value to the industry and engaging

with them to depict the reality of the realty sector.

Dr. A. Didar Singh

Secretary General

FICCI


3/11

FINDINGS

Current real estate sentiment score stands at 33implying that stakeholders feel the current real estate

market is somewhat worse compared to six months

back

Future sentiment score at 50 reflects a neutral viewindicating a status quo in the coming six months

PART I: India Real Estate Sentiment Index

100

90

80

70

60

50

40

30

20

10

0

33

CURRENT

O P T I M I S M

P E S S I M I S M

The index is based on a quarterly survey of key stakeholders including developers, private equity funds, banks and

NBFCs. The survey comprises questions pertaining to economy, project launches, sales volume, leasing volume, price

appreciation and funding. Respondents choose from the following options for which weights have been assigned

a) Better (100 points) b) Somewhat Better (75 points ) c) Same (50 points) d) Somewhat Worse (25 points) e) Worse

(0 Points). The index is calculated by taking the weighted average score of the percentage of responses in each of

these options. Hence a score of 50 represents a neutral view; a score above 50 demonstrates a positive outlook

whereas a score below 50 shows a negative sentiment. In order to present a holistic view on the real estate industry

two indices are computed. The current sentiment index indicates the respondent’s assessment of present scenario

compared to six months back and the future sentiment index represents the expectations in the coming six months.

The two indices have to be read independently and will have a time series going forward. The survey was conductedduring October-November 2013.

Approach

100

90

80

70

60

50

40

30

20

10

0

50

FUTURE

O P T I M I S M

P E S S I M I S M

FICCI-Knight Frank

REAL ESTATE

SENTIMENT INDEx

Q4 2013

Q4 2013 Q4 2013


4/11

FINDINGS

The real estate market has worsened compared to six months

back

Developers are of the opinion that the condition of the Indian

real estate market will not deteriorate in the next six months

Financial institutions, however feel that the real estate market

is still not bottomed out

OPTIMISM ON ECONOMY AND RESIDENTIAL SECTOR

00

90

80

70

60

50

4030

20

10

0

Economy ResidentialLaunches

ResidentialSales

Residential PriceAppreciation

New OfficeSupply

LeasingVolume

Office RentalAppreciation

Funding

Current Future

36

6151

38 46373326

29 4733

53

3836

ZONAL SENTIMENT SCORE

Current Future

FINDINGS

The stakeholders perceive that the

present residential and office markets

are comparatively weaker than what

they were six months back

Majority of the respondents are

optimistic about the economic scenario

and expect improvement in the next six

months

There is an evident optimism for the

residential sector be it launches, sales

volume or price appreciation in thecoming six months

Office sector on the other hand is

expected to be pessimistic in the

coming two quarters

Credit lending/ funding situation

appears worse now compared to six

months back and is not expected to

improve in the near future

FINDINGS

STAKEHOLDER SENTIMENT SCORE

FUTURE

34 50

CURRENT FUTURE

27 47

DEVELOPERCURRENT FINANCIAL

INSTITUTIONS

38

47

33

50

31

50

34

45

NORTH

EAST

WEST

SOUTH Current sentiment is pessimistic across all

zones

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

O P T I M I S M

P E S S I M I S M

54

46

FICCI-Knight Frank

REAL ESTATE

SENTIMENT INDEx

Q4 2013

FICCI-Knight Frank

REAL ESTATE

SENTIMENT INDEx

Q4 2013

SCORE >50: OptimismSCORE 50: Same/NeutralSCORE 50: OptimismSCORE 50: Same/NeutralSCORE


5/11

PART II: India RealEstate OverviewWe have considered seven major cities i.e. National

Capital Region, Mumbai Metropolitan Region, Pune,

Chennai, Bengaluru, Hyderabad and Kolkata to

represent the Indian real estate scenario.

RESIDENTIAL INDEX: UNIT LAUNCHES AND ABSORPTION

Launches Absorption

Project launches and absorption peaked in 2010

post the Global Financial Crisis (GFC) and have

been trending down since then

Drastic fall has been witnessed in the last threequarters of 2013

Residential launches and sales volume are

nearing 2009 levels

FINDINGS

FICCI-Knight Frank

REAL ESTATE

SENTIMENT INDEx

Q4 2013

300

250

200

150

100

50

100

7464 65

124139

157

182 188

138

117 113

134 129118

136127

141

95

69

135 137146

162

214 220

261 253

214

195

178 181185

195202

219

188

163

105

Q1 Q2 Q3 Q4

2009

Q1 Q2 Q3 Q4

2010

Q1 Q2 Q3 Q4

2011

Q1 Q2 Q3 Q4

2012

Q1 Q2 Q3 Q4

2013

I n d e x V a l u e : ( B a s e Q 1 2 0 0 9 = 1 0 0 )


6/11

OFFICE SPACE INDEX: ABSORPTION

Office space leasing volume picked up post

GFC and peaked in the year 2011 and has been

trending downwards since then

Despite a contraction in the office space

demand, overall absorption numbers are still

significantly ahead of 2009 levels

Absorption volume follows a cyclic pattern and

seem to peak in the second quarter of each

year barring 2012

FINDINGS

FICCI-Knight Frank

REAL ESTATE

SENTIMENT INDEx

Q4 2013

Absorption300

250

200

150

100

50

154

100109 96

152

234

167147

164

280

186

128

184 178174

85105

217

144

132

Q1 Q2 Q3 Q4

2009

Q1 Q2 Q3 Q4

2010

Q1 Q2 Q3 Q4

2011

Q1 Q2 Q3 Q4

2012

Q1 Q2 Q3 Q4

2013

I n d e x V a l u e : ( B a s e Q 1 2 0 0 9 = 1 0 0 )


7/11

150

140

130

120

110

100

90

80

160

150

140

130

120

110

100

150

140

130

120

110

100

90

150

140

130

120

110

100

90

134 134 139142

147 148

154 155

98 100 99102 104

107110

113

121126

132 134

142 142145 146

HYDERABAD

NCR

CHENNAI

RESIDENTIAL PRICE INDEX (BASE Q1 2009: 100)

MMR

Q1 Q2 Q3 Q42009 2010

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013

Q1 Q2 Q3 Q42009 2010

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013

Q1 Q2 Q3 Q42009 2010

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013

Q1 Q2 Q3 Q42009 2010

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013

100103 106

112115 116 116

124 122128 129

133

10095

91 90 89

94 9591 91

95 95 96

125128

130 131 131133 136

138

10098 97

103

113118 118 119

98

108 108 108

10097 96 95

9094

99101 106

114

9693

FICCI-Knight Frank

REAL ESTATE

SENTIMENT INDEx

Q4 2013


8/11

FINDINGS

Mumbai and Pune are forerunners in price appreciation

during 2009-2013 Pune shows the maximum appreciation amongst the

IT/ITeS driven markets of Bengaluru, Hyderabad and

Chennai

The NCR market prices trended downwards till the end

of 2010, post which they have risen more than anyother major residential market in India

Hyderabad has substantially underperformed

compared to other markets

160

150

140

130

120

110

100

121

134 133 134135 137 137 139

KOLKATA

Q1 Q2 Q3 Q42009 2010

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013

100 100 101103 108 106 109

117 119

100

120

150

140

130

120

110

100

90

BENGALURU

Q1 Q2 Q3 Q42009 2010

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013

118121

124127 127

132136 138

10098

101 102 103 104106

113 115

98 99 99

160

150

140

130

120

110

100

PUNE

Q1 Q2 Q3 Q42009 2010

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013

100 103

105 108111 114

117120

123

100 100

127130 133

138140

144147

150

123

120

FICCI-Knight Frank

REAL ESTATE

SENTIMENT INDEx

Q4 2013


9/11

OFFICE SPACE RENT INDEX (BASE Q1 2009: 100)

95 95 95 95 95

98

95

98

120

115

110

105

100

95

90

Q1 Q2 Q3 Q42009 2010

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013

120

115

110

105

100

95

90Q1 Q2 Q3 Q4

2009 2010Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2011 2012Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2013

120

115

110

105

100

95

90Q1 Q2 Q3 Q4

2009 2010Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2011 2012Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2013

HYDERABAD

NCR

CHENNAI

120

115

110

105

100

95

90Q1 Q2 Q3 Q4

2009 2010Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2011 2012Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2013

MMR

10098

9593

90

9395

93 9395 95 95

105106 106 106 107 106 107 107

100102

99101

105107 106

99 99101 102

106

102 102100 100 98 98

95 95

100 98102

98 98 100 100102 102

105 105 105

99100 99

101 100

98

101

98

100 101 99

96 95 94

9896

100 9999

96

FICCI-Knight Frank

REAL ESTATE

SENTIMENT INDEx

Q4 2013


10/11

120

115

110

105

100

95

90

120

115

110

105

100

95

90

120

115

110

105

100

95

90

FINDINGS

Office markets in India have seen minor appreciation

compared to residential markets Bengaluru office market has seen the maximum rental

appreciation during the analysis period

All IT/ITeS driven markets have witnessed rental

weakening since 2009 with the exception of Bengaluru

Mumbai office market has managed to sustain therentals with marginal appreciation of 7% since 2009

NCR office rentals remained stable with a slight

downward bias

Q1 Q2 Q3 Q42009 2010

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013

Q1 Q2 Q3 Q42009 2010

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013

Q1 Q2 Q3 Q42009 2010

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013

KOLKATA

BENGALURU

PUNE

108110

113

115 115

118 118 118

100 103

105

100 100 100 100 100 100 100

105 105

95 95

98

95 95

98 98 98100

98

95

98

93

95 95 95 95 95 95 95

100102

100

104 104102 102

104

10098 9698 98 98

10098 98 98 9898

FICCI-Knight Frank

REAL ESTATE

SENTIMENT INDEx

Q4 2013


11/11

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, we

believe that political compulsions will supersede

any economic urgency leading to a delayed

economic expansion during this period.

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 (Repo rate: May’09: 4.75%, Jan’14:

8.00%). Lack of any meaningful improvement in

determinants of housing demand, according to us

means the situation will remain the same.

Commercial Real Estate (CRE) is an area where

stakeholders are skeptical and anticipate a

contraction in demand, supply as well as prices

during January’14 to June’14. We believe a larger

magnitude of CRE project completions at a time

when business growth and employee addition

remain weak, will translate in to marginally higher

vacancy level in the Indian office market and

continue to put pressure on rents. Therefore, the

stakeholder survey results are in line with our

assessment of the CRE market.

Outlook

Knight Frank India in.knightfrank.com

Dr. Samantak Das

Chief Economist & Director - Research

[email protected]

Disclaimer: This report is published for general information only and not to be relied upon in any way. Although high standards have

been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability

whatsoever shall be accepted by FICCI or Knight Frank for any loss or damage resultant from any use of, reliance on or reference to the

contents of this document.

As a general report, this material does not necessarily represent the view of FICCI and Knight Frank in relation to particular properties or

projects. Reproduction of this report in whole or in part is not allowed without prior written approval of FICCI and Knight Frank to the

form and content within which it appears.

Ankita Nimbekar

Consultant - Research

[email protected]

FICCI ficci.com

Mousumi Roy

Senior Director & Head Real Estate -

Urban Infrastructure

[email protected]

FICCI-Knight Frank

REAL ESTATE

SENTIMENT INDEx

Q4 2013

RE Sentiment Index FICCI KnightFrank Feb2014

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