ASSOCHAM BUSINESS BAROMETER Survey on

:
“Flowing Sentiments in the Real Estate Sector”
May 2009

Prepared by:
GAURAV SHARMA ASSOCHAM RESEARCH BUREAU

based on an expert (focus) group of 25 real estate firms. 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. retail space (30 – 40 per cent) and commercial space (20 – 30 per cent) were witnessing steep contraction in demand.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. The Assocham Business Barometer (ABB) Survey titled “Flowing Sentiments in the Real Estate Sector”. at a time when luxury housing (more than 50 per cent). As per the Survey (conducted between May 15 – 25. 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. found 88 per cent of the respondent CEOs sensing a quick revival in the sectoral activity within next three months as developer’s strategic shift towards affordable housing and a significant price correction in the housing projects has pepped up the sale of residential property. . SEZ (40 – 50 per cent). 2009). According to the Survey. 84 per cent of the surveyed CEOs signaled the least impact (in terms of demand contraction) in the affordable housing segment. affordable housing was the single most resilient segment with a minimal contraction of zero to ten per cent. according to an ABB Survey. With developers’ concentrated efforts to target the lower and middle income consumer group during the downturn. 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.

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. 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. 60 per cent of the surveyed CEOs perceived resurgent stock market as the most prominent source of finance to fund the sector’s cash requirement. Hefty funds raised through QIPs in the stock market (exceeding Rs 8. further relaxed norms for ECB and FDI along with a need for speedier and hassle free statutory approvals. The surveyed developers also sought reduced stamp duty charges to increase revenue and avoid duty evasion. However.000 crore) along with debt restructuring would allow the developers to manage their cash flows even more efficiently to address their liquidity concerns. In the present market scenario. followed by 28 per cent viewing bank credit as the best viable option.On the policy front. respondents asked for a central regulation body. of all the measures taken by the RBI and the commercial banks. Among other policy issues. 64 per cent of the respondent CEOs were of the view that RBI’s allowance to banks to restructure loans to developers has been the most successful in improving the liquidity for real estate sector. recognition of real estate sector as industry. . 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 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.

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. . the financial capital of India.Among the six metropolitan cities. fifth and sixth respectively. Mumbai. Kolkata and Hyderabad were ranked fourth.

steel. Taking stock of the market dynamics flowing into the real economy. . market segmented scenario according to tier/income classification and the policy measures announced by the RBI and government.No. The questionnaire consists of 15 questions divided into three sections as under: S. 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. 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. 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. Feeling the pain of global recession and downturn in the Indian economy. 1 2 3 Section General Market-Led Factors Segmented Market Scenario Policy Measures Total No. Almost five per cent of the country's GDP is contributed by the housing sector.ENCLOSURE: Assocham Business Barometer (ABB) Survey on ‘Real Estate Sector’ The Indian real estate sector plays a significant role in the country's economy. paints etc. The real estate sector is also responsible for the development of over 250 ancillary industries such as cement. The sector contributes heavily towards the gross domestic product (GDP). real estate has been among the worst affected sectors to witness significant upheavals amid serious policy changes in the recent past.

we assure you high degree of confidentiality about respondent’s identity would be maintained. .RESPONDENTs’ DETAILS Name: Designation: Organization: Contact Details: ____________________________________________________ ____________________________________________________ ____________________________________________________ ____________________________________________________ Please Note: As your response would form a part of the recommendations to be made to the government.

Moderate D. You expect the real estate market revival to take place within __________? A.Healthy C. Healthy B. Moderate . 3-6 months C. 6-12 months D. More than 12 months Q2. 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 Reduction in demand (in %) 20-30 30-40 40-50 More than 50 . 0-3 months B. The price correction of real estate properties has led to a __________ rise in demand A. Weak – Moderate E.I: GENERAL MARKET-LED FACTORS Q1. Weak Q3.SECTION.

Affordable housing B. Retail E. SEZ F. Which among the following is the most dominating factor which has led to an improvement in the absorption rate? A.ii) Which of the following would be the most dominating segment to revive the demand scenario in the real estate sector? A. Any Other ___________________________ Q5. Bank Credit B. Stock Market D. In the present market scenario which is the most prominent source of finance to raise capital to fund the sector’s cash requirement? A. Private Equity C. Price correction (drop in the per sq ft rate) B. Any Other ___________________________ . Luxury Housing C. Reduction in unit sizes C. Promotional packages offered D. Any Other __________________________ Q4. Commercial property space D.

Tier III cities Q7. Tier III cities Q8. Greater yield of tier II and tier-III cities D. Metropolitan cities B. Which of the following market segment you see as the most promising one to boost up the real estate sector? A. Low Income Group (LIG) B. Which among the following factors has given the maximum impetus to investment in the Tier II and Tier III cities? A. Tier II cities C. Any Other ________________________ Q9. Commercial activity moving to the tier II and tier-III cities B. Which of the following market segment witnessed the maximum impact of the slowdown in the sector? A. High Income Group (HIG) . Middle Income Group (MIG) C.SECTION-II: CATEGORIZATION OF MARKET SEGMENTS Q6. 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. Higher property prices in tier I C. Metropolitan cities B. Tier II cities C.

Chennai E. Hyderabad . Kolkata F. Mumbai D.Q10. Delhi NCR B. Bangalore C. i) How saturated do you find the real estate assets in metropolitan cities? (Kindly tick your response) City Low Delhi NCR Bangalore Mumbai Chennai Kolkata Hyderabad Degree of Saturation Low-Medium Medium Medium-High High ii) Which Metropolitan city you think would witness the highest growth in its real estate market for FY 2009-10? A.

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. RBI’s allowance to banks to restructure loans to developers B. Reduction in Repo rate/PLR D. Any Other _______________________ . Stimuli given to the sector through fiscal and monetary measures has been adequate to help boost the demand-supply scenario? A. Yes B. Neither agree nor disagree D.SECTION-III: POLICY MEASURES Q11. Strongly Disagree Q13. No Q12. Disagree E. Higher growth in Housing credit E. Strongly Agree C. Do you think there is still some scope for monetary easing by RBI before its monetary policy review for Q1 FY 2009-10? A. Agree B. Reduced risk weightage on real estate loans to 100 % from 150 % C.

Q14. External Commercial Borrowings D. Strongly Disagree . In which of the following. Real Estate Mutual Funds / Real Estate Investment Trusts C. investment norms needs to be further relaxed to improve on sector’s liquidity requirement? A. Agree B. Any Other _______________________ Q15. There is a need to unify stamp duty on property across all the Indian States? A. Strongly Agree C. Disagree E. Foreign Direct Investment B. Neither agree nor disagree D.

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 .

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