Industry sentiments take a hit due to ambiguity over policy issues

Knight Frank


FICCI-NAREDCO-Knight Frank India unveils the latest findings of the Real Estate Sentiment Index for Q2 2017 (April–June 2017)

Dr. Samantak Das – Chief Economist & National Director – Research, Knight Frank India shares an overview on India’s Real Estate Sentiment (Residential and Commercial) for Q2 2017:

“The current sentiments that had been positive, in the last quarter have moved in the negative zone for the first time since Q4 2015. The dip in sentiments is largely a result of ambiguity over policy issues, especially the implementation of the Real Estate Regulation and Development (RERA) Act, 2016 in some states and the Goods and Services Act (GST). We, however, believe that the dip in sentiments is transient in nature. Going forward when clarity on policy issues come in, it’s positive impact should get reflected in the sentiments of the shareholders. This positivity is apparent in the future sentiments of stakeholders which is positive but not bullish. Stakeholders are of the view that the going forward the economy will reflect better results and become more transparent. Increasing transparency levels and special status given to affordable housing, by the government will smoothen the flow of institutional funds into the sector, that too at competitive rates. In the residential property market launches that hit new lows, in the recent past, should pick up in the next six months. This will largely be a result of clarity on policy issues. However, most stakeholders are of the view that, going forward it will take time for homebuyers to come back to the market. The buyer confidence that was marred by project delays, non-deliveries and litigations will only come back once they see the implementation of policy reforms spearheaded by the government. In a nutshell while the current sentiments are down, the future is certainly bright in the residential property market. The success for this sector lies in the proper implementation of government schemes by the respective states. As regards the office market, new office supply that has been eluding the market in the past two years will continue to do so in the coming six months. Paucity of quality of office space has had its bearing on office leasing. Majority of the stakeholders opine that leasing will either hold steady or will fall in the coming six months. This lack of supply will put an upward pressure on rentals in the coming six months.”

Findings of the Report:

· The current sentiment score has gone in the negative zone and has reached Q4 2015 levels. Factors such as the uncertainty over the manner and form in which the Real Estate (Regulation and Development) Act, 2016 (RERA) rules will be implemented across states and the implementation of the Goods and Services Tax (GST) from July 1, 2017 created confusion among stakeholders, especially with respect to on-going projects.

· The “wait and watch mode” is still prevailing in the sector in the expectation of clarity on various policy measures by the government in the next six months.

· The future sentiments however, are positive but not bullish. This positivity stems from the fact that stakeholders expect clarity, on policy issues, to come in the next six months.


· 62% of the respondents opine that going forward the economy will reflect better results because most of the policy reforms, concerning the real estate sector, that were in the pipeline have already seen the light of the day.
· Stakeholder sentiments hold steady about the future flow of funds into the real estate sector. This will be a result of the transparency and processes brought about by policy reforms of the government which will be instrumental in holding the positive sentiments of institutional funds, including banks.


· There is a striking recovery in the sentiments of residential launches in Q2 2017 with nearly 68% of the respondents in Q2 2017 opining that launches will improve in the next six months. It is likely that these positive sentiments are triggered by the upcoming festival season and expected clarity on policy issues.
· On the other hand, there is a marked dip in the sentiments of residential sales in the second quarter of 2017 with 68% of the respondents of the opinion that it will take time for buyers to return to the market. The buyer confidence that was marred by project delays, non-deliveries, and litigations to name a few is likely to return on implementation of the policy reforms spearheaded by the government.
· In contrast to the lacklustre sentiments on residential sales, 59% of the respondents have opined that there will be an upward pressure on residential prices in the coming six months due to factors such as an increase in compliance costs due to implementation of new policies.


· New office supply has been eluding the market for the past two years and the sentiments in Q2 2017 substantiate this fact. 64% of the stakeholders believe that new office supply will remain a challenge in the next six months due to factors such as project delays and lack of quality office space in key locations leading to a supply crunch in all the major cities of the country.

· Office leasing has been holding steady in the past few years but leasing volumes in the first and second quarter of 2017 have been low across cities. This is corroborated by the market sentiments as well, where more than half of the stakeholders opine that leasing volume will either hold steady or fall further in the coming six months. Pressure on the IT/ITeS sector and the lack of quality supply in key locations has contributed towards the slowdown in leasing of office space.
· However, this lack of supply will lead to an upward pressure on rentals with nearly 86% of the respondents believing that office rentals will either remain the same or move up in the coming six months.


· All the zones look upbeat with the future sentiment score. The fact that many states have modified their RERA rules as per the local dynamics has given a positive impetus to sentiments among stakeholders from the supply side of the real estate market.


Established in 1927, FICCI is the largest and oldest apex business organisation in India. A non-government, not-for-profit organisation, FICCI is the voice of India’s business and industry. FICCI draws its membership from the corporate sector, both private and public, including SMEs and MNCs; FICCI enjoys an indirect membership of over 2,50,000 companies from various regional chambers of commerce. For further information, please visit


National Real Estate Development Council (NAREDCO) is an autonomous self-regulatory body under the aegis of Ministry of Housing and Urban Poverty Alleviation, Government of India. NAREDCO strives to be the collective force influencing and shaping the real estate industry. It seeks to be the leading advocate of developing standards for efficient, effective, and ethical real estate business practices, valued by all stakeholders of real estate sector and viewed by them as crucial to their success. NAREDCO works to create and sustain an environment conducive to the growth of real estate industry in India, partnering industry and government alike through advisory and consultative processes. For further information, please visit

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