Residential Realty Prices May Worsen: Study

Mumbai: The bearish sentiment is likely to continue in the residential real estate sector for the next six months and the pricing situation will remain stagnant or may even worsen, while an uptick in office space rentals will give a boost to the commercial realty space, says a survey. 

According to a FICCI-Knight Frank report on sentiment index for July-September period, the festive season has not been able to lend fillip to the prevailing bearish sentiment in the residential real estate market. 

The stakeholder sentiment declined to 59 in Q3 2015 from 71 in June-September 2014.

 "The on-going festive season is unlikely to revive the residential sector in the major cities of India. Majority of the supply side stakeholders 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," Knight Frank India Chief Economist and National Director Samantak Das said. 

As per the survey, nearly 82 per cent of respondents feel that residential price appreciation is either going to remain the same or worsen in the coming six months. 

In the commercial space, however, the stakeholders are reasonably optimistic about with nearly 62 per cent of the respondents expecting the leasing volume to improve at the back of limited supply.

More than 50 per cent of respondents said office space rentals will strengthen by the end of March 2016, the report noted.

"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," Mr Das said.

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

"The stakeholders are particularly pessimistic about the residential sector and they do not foresee any significant recovery in the next six months. However, the optimism about the future is driven mainly by the office space which is expected to experience increase in rentals due to robust leasing volumes and limited supply," he added.