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GAURAV SHARMA ASSOCHAM RESEARCH BUREAU
Affordable housing topped with improved cash flows would recover the real estate sector in coming three months: Assocham Survey
Anticipating strong policy measures for the real estate sector in the upcoming budget, embattled realty majors see positive signs of recovery taking place within next three months as affordable housing rev up demand and improved cash flows address their liquidity concerns, according to an ABB Survey.
The Assocham Business Barometer (ABB) Survey titled Flowing Sentiments in the Real Estate Sector, based on an expert (focus) group of 25 real estate firms, found 88 per cent of the respondent CEOs sensing a quick revival in the sectoral activity within next three months as developers strategic shift towards affordable housing and a significant price correction in the housing projects has pepped up the sale of residential property.
As per the Survey (conducted between May 15 25, 2009), a whopping 92 per cent of the respondent developers considered affordable housing as the most dominating segment to shore up the demand in real estate sector. The policy actions supplementing the robust demand in the housing sector is likely to hold the key for a speedy recovery phase in the sector.
With developers concentrated efforts to target the lower and middle income consumer group during the downturn, 84 per cent of the surveyed CEOs signaled the least impact (in terms of demand contraction) in the affordable housing segment.
According to the Survey, at a time when luxury housing (more than 50 per cent), SEZ (40 50 per cent), retail space (30 40 per cent) and commercial space (20 30 per cent) were witnessing steep contraction in demand, affordable housing was the single most resilient segment with a minimal contraction of zero to ten per cent.
On the policy front, the surveyed CEOs sought single window clearances for all schemes under affordable housing in the line of SEZ clearances to enable fast development of units and achieve the short fall of about 26 million houses at the earliest.
A majority of 76 per cent of the ABB respondents viewed the stimuli given to the sector through fiscal and monetary measures as inadequate to help boost the demand-supply scenario. However, of all the measures taken by the RBI and the commercial banks, 64 per cent of the respondent CEOs were of the view that RBIs allowance to banks to restructure loans to developers has been the most successful in improving the liquidity for real estate sector.
In the present market scenario, 60 per cent of the surveyed CEOs perceived resurgent stock market as the most prominent source of finance to fund the sectors cash requirement, followed by 28 per cent viewing bank credit as the best viable option.
Hefty funds raised through QIPs in the stock market (exceeding Rs 8,000 crore) along with debt restructuring would allow the developers to manage their cash flows even more efficiently to address their liquidity concerns.
Almost 92 per cent of the respondent CEOs strongly agreed to the need to unify stamp duty on property across all the Indian States. The surveyed developers also sought reduced stamp duty charges to increase revenue and avoid duty evasion.
Among other policy issues, respondents asked for a central regulation body, recognition of real estate sector as industry, further relaxed norms for ECB and FDI along with a need for speedier and hassle free statutory approvals.
The Survey also found that metropolitan cities has been the worst affected market segment whereas tier II cities have been seen as the most promising one to boost up the sector as commercial activity moving to these cities and their greater yield has given a tremendous impetus to investment in the these market segments.
Among the six metropolitan cities, the financial capital of India, Mumbai, has been ranked first as the most saturated in terms of real estate assets (both commercial and residential) followed by Delhi NCR (second) and Bangalore (third) whereas Chennai, Kolkata and Hyderabad were ranked fourth, fifth and sixth respectively.
ENCLOSURE:
Feeling the pain of global recession and downturn in the Indian economy, real estate has been among the worst affected sectors to witness significant upheavals amid serious policy changes in the recent past.
Taking stock of the market dynamics flowing into the real economy, Assocham Research Bureau is undertaking an expert (focus group) survey on the prevailing sentiments pertaining to the real estate sector regarding the inherent industry led demand-supply factors, market segmented scenario according to tier/income classification and the policy measures announced by the RBI and government.
S.No. 1 2 3
Section General Market-Led Factors Segmented Market Scenario Policy Measures Total
No. of Questions 5 5 5 15
You are kindly requested to spare your precious time to be a part of the Survey and revert back with your responses before May 25, 2009. The results of the survey would be used for an Assocham Business Barometer Study on Indian real estate market indicating the sentiments flowing in the sector.
RESPONDENTs DETAILS
Please Note: As your response would form a part of the recommendations to be made to the government, we assure you high degree of confidentiality about respondents identity would be maintained.
Q1.
You expect the real estate market revival to take place within __________? A. 0-3 months B. 3-6 months C. 6-12 months D. More than 12 months
Q2.
The price correction of real estate properties has led to a __________ rise in demand A. Healthy B. Moderate - Healthy C. Moderate D. Weak Moderate E. Weak
Q3. i) How much demand contraction was visible during downturn of the real estate sector in the following market segments? (Kindly tick your response)
Market Segment 0-10 Affordable Housing Luxury Housing Commercial Space Retail SEZ 10-20
ii) Which of the following would be the most dominating segment to revive the demand scenario in the real estate sector? A. Affordable housing B. Luxury Housing C. Commercial property space D. Retail E. SEZ F. Any Other __________________________
Q4.
Which among the following is the most dominating factor which has led to an improvement in the absorption rate? A. Price correction (drop in the per sq ft rate) B. Reduction in unit sizes C. Promotional packages offered D. Any Other ___________________________
Q5.
In the present market scenario which is the most prominent source of finance to raise capital to fund the sectors cash requirement?
Q6.
Which of the following market segment witnessed the maximum impact of the slowdown in the sector? A. Metropolitan cities B. Tier II cities C. Tier III cities
Q7.
Which of the following market segment you see as the most promising one to boost up the real estate sector? A. Metropolitan cities B. Tier II cities C. Tier III cities
Q8.
Which among the following factors has given the maximum impetus to investment in the Tier II and Tier III cities? A. Commercial activity moving to the tier II and tier-III cities B. Higher property prices in tier I C. Greater yield of tier II and tier-III cities D. Any Other ________________________
Q9.
Which among the following targeted consumer group would contribute the maximum share (in volume terms) in your real-estate portfolio for the next 2-3 years? A. Low Income Group (LIG) B. Middle Income Group (MIG) C. High Income Group (HIG)
Q10.
i) How saturated do you find the real estate assets in metropolitan cities? (Kindly tick your response)
High
ii) Which Metropolitan city you think would witness the highest growth in its real estate market for FY 2009-10? A. Delhi NCR B. Bangalore C. Mumbai D. Chennai E. Kolkata F. Hyderabad
Q13.
Which of the following measures taken by RBI and commercial banks has been the most successful in improving the liquidity for real estate sector? A. RBIs allowance to banks to restructure loans to developers B. Reduced risk weightage on real estate loans to 100 % from 150 % C. Reduction in Repo rate/PLR D. Higher growth in Housing credit E. Any Other _______________________
Q14.
In which of the following, investment norms needs to be further relaxed to improve on sectors liquidity requirement? A. Foreign Direct Investment B. Real Estate Mutual Funds / Real Estate Investment Trusts C. External Commercial Borrowings D. Any Other _______________________
Q15.
There is a need to unify stamp duty on property across all the Indian States? A. Agree B. Strongly Agree C. Neither agree nor disagree D. Disagree E. Strongly Disagree
What further steps you think the policy makers need to take to revive the real estate sector?
We greatly appreciate and value your time for filling up the questionnaire. Thanks and Regards Gaurav Sharma Assocham Research Bureau