Post-budget, realty prices in 8 out of 10 cities surveyed have seen a downward correction, according to IIMB Magicbricks Housing Sentiment Index.
The IIMB Magicbricks HSI is based on the ‘Diffusion Index’ methodology, widely used to capture market sentiments globally.
Among the cities which witnessed correction, Noida topped the list by 19 per cent fall in sentiment compared to the previous quarter (Q3).
The other nine cities witnessed over 20 per cent correction since the general elections held in May 2014 with the NCR most affected (down 30 per cent).
As per the IIMB Magicbricks buyer sentiment survey change since May 2014 to present is as follows: Ahmedabad (-14per cent), Bengaluru (-30 per cent), Chennai (-29 per cent), Delhi (-30 per cent), Gurgaon (-38 per cent), Hyderabad (-25 per cent), Kolkata (-29 per cent), Mumbai (-20 per cent), Noida (-34 per cent), and Pune (-22 per cent).
“Budget 2015 did not address the expectations of the consumers and this is reflected in the consumer sentiment. Consumers are still in the wait-and-watch mode and are likely to take a decision once more clarity is visible on both market trends and monetary policy front,” said Sudhir Pai, CEO, Magicbricks.
As per the survey, 48 per cent home buyers are waiting for prices to come down, reflecting the unaffordable levels to which property prices have soared in the last few years especially in Tier I cities.
Bengaluru bucks trend
NCR witnessed a 38 per cent drop in sentiment since May 2014. Inspite of high unsold inventory, developers are unwilling to slash prices. Poor/stalled infrastructure, lawsuits against builders and increase in circle rates have resulted in subdued sentiments in this region across the last three quarters.
Bengaluru, the only city to be posting positive sentiment all along, is now in neutral territory with HSI at 100, a drop of 30 per cent since May 2014. With no further reason for property prices to increase, investors have no reason to purchase property at this stage. Salary increases have remained subdued for the past one year making houses unaffordable.
The main reason for Bengaluru to buck the trend, according to S Suresh Hari, Secretary, CREDAI Bengaluru, is that the city has been witnessing healthy demand-supply position. Builders have adjusted supplies in tune with demand, leading to stability in market and gradual increase in prices, he said.
Mumbai and Delhi witnessed slight upward corrections this quarter, but still remain in the negative territory (HSI 85 and 83 respectively).
As for the Seller Survey, it indicated that sellers continue to be bullish about markets with an HSI of 146, a 9 per cent drop since elections.
Uma Sitaraman, Lead Researcher, IIMB-Century Real Estate Research Initiative (CRERI), said, “Sentiments have been steadily falling the past few quarters primarily due to homes becoming unaffordable across major cities. Further drop in sentiment across 8 of the 10 cities after the union budget indicates that this sector has been largely ignored.”
“The Union Budget has not addressed affordable housing at all. There was also no major announcement to bring cheer to the home buyer. There is a very visible supply demand mismatch and unless this is addressed, the housing markets are going to remain subdued. Interest rate cuts alone are not enough to attract buyers to the market at this stage,” she added.