Government’s constant efforts to boost demand in real estate sector seem to be falling flat on their face as a new study shows current sentiments of real estate builders and buyers is turning more pessimistic than previously expected.

The latest survey by Knight Frank – FICCI – NAREDCO - ‘Real Estate Sentiment Index Q3 2019’, shows that the current sentiments of the real estate stakeholders in India have plummeted further to 42 in the July-September quarter of 2019 (Q3 2019) from the preceding quarter - a level previously seen during the heightened uncertainty period of pre-election in the first quarter of 2014 and the demonetisation period (41) in the last quarter of 2016.

The report further indicates that the future sentiment, or the outlook for the coming six months, has also turned ‘pessimistic’ for the first time since the inception of this survey, a clear indication that the sector is under immense pressure. However, sentiments toward the commercial real estate sector have remained steady, with the outlook for the new office supply healthy for the coming six months.

A score of over 50 signifies ‘Optimism’ in sentiments, a score of 50 means the sentiment is ‘Same’ or ‘Neutral’, while a score of below 50 shows ‘Pessimism’.

The stakeholders continue to be pessimistic and wary owing to the overall economic slowdown and the slump in domestic consumption demand, the study indicated.

Drying credit flow to developers due to the NBFC crisis and slowing down of the economy at 5 per cent in the June quarter – a five-year low has all negatively impacted the current sentiment scores.

Measures taken by the government such as the slashing of corporate tax rate to 22 per cent, the liquidity support to HFCs and NBFCs and the creation of a stressed asset fund (AIF) of INR 20,000 crore to boost liquidity and revive demand have failed to infuse confidence in the market; thus, further downgrading the current sentiment score.

Future sentiment score

Dropping to an all-time low at 49 in Q3 2019, the future sentiment index score is a clear indication that the sector is under pressure.

The real estate industry has been in the doldrums for over three years now, and the stakeholders see no immediate solution to the sector plagued with defaults, weak demand and the drying up of funding because of the NBFC crisis. The restricted flow of liquidity has resulted in many real estate projects being stuck in the past one year due to lack of funds. Along with the above, the realisation that the slowdown in the economy will further weaken the demand and in turn impend cash flow issues for the developers has marred the outlook of the stakeholders for the coming six months.


“The real estate stakeholders’ sentiment has gone in the ‘pessimistic’ zone for the current quarter owing to poor demand-side performance, despite a plethora of measures by the government. However, it is more significant to note that, for the first time, the stakeholders are wary regards the future six months for the real estate sector and the overall economy, thus pushing the sentiment score in the red. While the finance minister has announced measures in this quarter attempting to sort out the supply-side challenges, however, these measures are mostly focused on affordable housing segment, leaving out the vast majority of non-affordable from the announced benefits. These measures have not helped infuse confidence in the stakeholders, as the real challenge lies in demand-side story, where end users are unwilling to make home purchases owing to lack of financial confidence. The supply-side sops will not be enough till the time demand is revived by putting money in the hands of the consumer and his confidence is restored.,” said Shishir Baijal, Chairman and Managing Director of Knight Frank India.

A majority 67 per cent of the stakeholders have maintained that given the weak demand due to a cautious sense on the overall economy, stagnant job market and the apprehension to spend, the residential sales will either remain tepid or may even go down further in the coming six months.


Sentiment regarding residential price appreciation also looks grim, with 86 per cent of the stakeholders opining that prices will remain at the same levels or even drop further in the coming six months.

Taking cognizance of the slack in the sector, the RBI has cut the repo rate by 25 basis points for the fifth consecutive time in the year, effectively bringing down the repo rate by an aggregate of 135 basis points. However, the stakeholders have expressed concern on the effective transmission of this rate cut to retail consumers in the form of discounted credit.

Sentiment regarding the outlook for the new office supply is strong, with 82 per cent of the respondents believing that the coming six months will see new supply additions across the major office markets in the country.



The outlook for the office leasing activity remains unchanged in Q3 2019, with 79 per cent of the stakeholders opining that leasing activity will stay steady or may even improve in the coming six months.

Stakeholder outlook with regards future rental appreciation has dipped in Q3 2019 with 79 per cent of the stakeholders expecting rents to either remain stable or inch upwards as against the thumping 87 per cent in the preceding quarter. The sentiment, however, is in the positive zone, and stakeholders expect rents to inch up in quality office space.

Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure Ltd. and Chairman of FICCI Real Estate Committee, said, “Instead of small incremental steps, it is time for a quantum leap in policy planning and implementation. The government needs to ensure a stable, predictable business-friendly environment that not just ensures economic growth but also leads to job creation and income stability. Further, moving beyond the accolades of signed MOU’s, fast track efforts should be put to ensure deployment of committed investments. Accelerated use of digitisation is one aspect that can meaningfully lift the current constraints and improve efficiencies as we embark upon this journey. We should aim to build an India story that stands for both “ease of doing business” as well as “sustain profitable growth.”