Future bright for commercial real estate! Residential sector may stagnate

Residential price appreciation across the top six cities of the country is either going to remain the same or worsen in the coming six months, while commercial real estate is poised for better times, feel real estate developers and financial institutions.

According to the FICCI-Knight Frank Real Estate Sentiment Index for the July-September 2015 quarter, majority real estate developers and financial institutions are of the opinion that the residential sector is not going to experience any upturn in sales and new launches in the coming six months, while the they are reasonably optimistic about the office market with 62% of the respondents expecting the leasing volume to improve at the back of limited supply.

“Delayed reforms have weakened the present business sentiment, which explains the downward trend in the current score. The supply-side stakeholders (developers and financial institutions) believe that today’s situation is worse, compared to what it was six months ago,” said Samantak Das, chief economist & national director – research, Knight Frank India.

Nearly 82% of the survey respondents feel that residential price appreciation is either going to remain the same or worsen in the coming six months, while more than 50% of the respondents feel that office space rentals will strengthen by the end of Q1 2016.

All the zones in the country observed a dip in sentiment levels during Q3 2015 compared to the preceding quarter, showing a clear reduction in business sentiments across India.

The North zone witnessed the steepest decline in the future sentiment score during Q3 2015. Stakeholder sentiments have barely made it into the positive territory in view of the current challenges faced by the underperforming residential sector in NCR.

Stakeholder sentiments have been going downhill since the December quarter last year, indicating their shaken confidence levels. The current sentiment score has gone down to 48 in the September quarter from 63 in the same quarter last year, while the future sentiment score declines to 59 in the September quarter from 71 in the same quarter last year.

“Although the future score at 59 falls in the positive territory, the overall declining trend reflects the weakening business confidence,” said Das.

While the Q3 2015 survey results show that developers and financial institutions believe that the market scenario will improve in the next six months, the level of optimism is demonstrating a declining trend since Q3 2014.

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