Subdued demand may cause prices to remain stagnant, say financial institutions
New Delhi, May 12, 2015:
Owing to excess supply prevailing during the last two years, developers across the cities of Mumbai, Delhi-NCR, Bengaluru, Chennai, Hyderabad and Pune have continued to restrict new residential launches, a new report said.
Sentiment score
“While new launches have nearly halved during the quarter ended March 2015 compared to the same period last year, sales volume has managed to hold steady. However, new launches is likely to see a marginal improvement over the next six months,” according to the Real Estate Sentiment Index for January – March 2015, launched by Knight Frank India and FICCI.
While the report’s current sentiment score at 51 is barely positive, the future sentiment score still stands at a healthy 64, indicating a strong positive undercurrent.
“Although the macro-economic fundamentals are in place, the challenges faced during State elections in the recent past and the large number of ordinances passed during the present Government’s regime seems to have shaken stakeholder confidence. Such an unprecedented number of ordinances reflect the challenges faced by the Government in the upper house of the Parliament,” the report added.
Prices to remain flat
The current lull in the residential market has bogged down stakeholder sentiment, with just 15 per cent respondents expecting the residential sales to be better in the coming six months.
On the pricing front, the report suggests that majority of the developers and financial institutions expect prices to remain stagnant in the coming six months on the back of subdued demand.
“The office market had already seen a significant turnaround in 2014 and the trend is expected to continue throughout 2015,” said Samantak Das, Chief Economist & Director – Research, Knight Frank India, adding that there has been a drop in transaction volumes in the first quarter of 2015.
Office space
The office market has seen absorption of over 9 million sq ft which is a 15 per cent drop from the same period last year due to lack of quality office space supply and certain big ticket transactions which are due for closure in the subsequent quarters.
Sentiment regarding office space rental appreciation is at an all-time high with 85 per cent of the respondents believing that the rentals have already bottomed out and should see an increase going forward. Business Line
