The economic slowdown that is impacting India’s consumption story has taken its toll on the real estate sector as well as industry stakeholders said that the weak sentiments are expected to remain for another half of the year. “Indian real estate stakeholders have downgraded the current period outlook for the ongoing six months to ‘Pessimistic’, indicating no improvement in the level of on-ground activities for the sector,” a joint report by Knight Frank-FICCI-NAREDCO said on Tuesday. While the economic slowdown is one reason affecting consumption across industries, the same in the real estate sector is worsened by factors like the NBFC crisis, developer defaults and Bankruptcies.
Going further, 74% of the industry stakeholders believe that the economic situation may take a turn for the worse in the next six months. They also exhibit low confidence in the market situation to alleviate the current chaos. This is also compounded by factors such as lowering of India’s GDP outlook by various global rating agencies including International Monetary Fund (IMF), DBS Bank and Asian Development Bank (ADB). 53% of the stakeholders also believe that the lenders will exercise caution in financing sectors such as real estate, automobile and other consumer-driven sectors.
“The economic slowdown, which has moved well beyond real estate into segments like auto, FMCG and FMCD, is firmly establishing a slowdown in buyer sentiments, indicating a further delay in the end-user purchase decision,” said Shishir Baijal, Chairman and Managing Director of Knight Frank India. This comes in the light of slumping sales for automobile and FMCG sectors.
Ongoing liquidity crisis and diminished demand scenario have done an onslaught on consumer sentiments, especially for the residential segment. “Stakeholders, while showing moderate optimism, are still cautious in their expectations on account of an overall economic slowdown that is impacting the real estate sector,” said the report. With an inventory overhaul, weak demand, and developer defaults, the borrowing cost has increased in the sector. Those who want to do good business are also finding it tough to convince lenders.
Leasing, renting takes an upward swing
While residential demand has slackened, the sentiments are reversed for the office sector. The outlook remains positive for the next six months for leasing and renting office spaces.