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Real Estate Sector Outlook: Residential Market Sentiment
By Aman
Real Estate Stakeholders Expect Residential Market to Improve in the Coming Six Months
The Indian residential real estate sector showed improved sentiment during the first quarter of 2019, with industry stakeholders expressing greater confidence about the market outlook for the following six months. The sentiment was supported by policy changes, tax-related measures and steps aimed at improving liquidity in the sector.
The assessment was based on the Q1 2019 Real Estate Sentiment Index, prepared by Knight Frank India in association with FICCI and NAREDCO. The report indicated that sentiment had improved compared with the previous quarter.
Positive Outlook for the Real Estate Sector
The future sentiment score for the sector reached 63 points in Q1 2019, indicating an optimistic outlook among participating stakeholders.
Industry participants believed that regulatory reforms and greater transparency were gradually changing the structure of the real estate market. Measures related to RERA, GST and affordable housing were also viewed as factors that could support the sector's recovery.
Residential Market Expected to See Demand Revival
The residential segment was among the areas where stakeholders expressed optimism. A majority expected government and banking-sector measures to contribute to new project launches and improved housing sales during the following six months.
According to the survey:
87% of respondents expected new residential launches during the next six months.
85% of stakeholders believed the consolidation of the organised and unorganised developer segments could support housing demand.
Respondents expected lower policy rates to improve financing conditions and potentially support property sales.
Sentiment around residential property prices also improved, with many respondents expecting prices to remain stable or increase moderately.
Impact of RERA and GST
The implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA) was viewed as an important step towards greater transparency and accountability in the sector.
GST-related changes also contributed to the improved outlook. The report noted that the GST rate had been reduced to 5% for under-construction homes outside the affordable housing category and 1% for affordable housing at that time. These changes were expected to influence buyer sentiment and improve market activity.
Lower Interest Rates Could Support Housing Demand
Changes in the monetary policy environment were another factor influencing market sentiment.
The Reserve Bank of India had reduced the repo rate by 25 basis points, taking it to 6% at the time covered by the report. Stakeholders expected lower interest rates to improve access to housing finance and potentially encourage buyers who had delayed their purchase decisions.
Regional Real Estate Sentiment
The report also highlighted differences in sentiment across India's major regions.
The North zone returned to the optimistic range in Q1 2019, after being below the optimism threshold in the previous quarter. Stakeholders noted that markets such as Gurugram, Noida and Greater Noida were undergoing consolidation as developers adapted to RERA and GST requirements.
The South, East and West regions had also remained comparatively positive over several preceding quarters.
Developers Show Greater Confidence
Developer sentiment regarding the next six months also improved. Changes involving GST, affordable housing initiatives and the exemption related to notional rent were viewed as measures that could provide some support to the industry.
Reduced borrowing costs were another factor considered important because easier financing could help developers access funds for project execution while potentially making home loans more attractive to buyers.
Factors Supporting the Market Outlook
Several developments contributed to the improved sentiment during the period:
Implementation of RERA
Rationalisation of GST rates
Lower repo rates
Measures supporting affordable housing
Greater transparency in the real estate sector
Expected improvement in housing demand
Consolidation among real estate developers
Better availability of project financing
Conclusion
The Q1 2019 real estate sentiment survey showed that industry stakeholders had become more positive about the residential property market and its prospects for the following six months. Policy reforms, lower interest rates, GST changes and increasing regulatory transparency were among the factors supporting this outlook.
However, the findings represent stakeholder sentiment from Q1 2019 and should be treated as historical market information rather than a current assessment of India's real estate sector.