As inflation remains high in India, tightening monetary policy measures and an adjusted economic growth forecast have altered the stakeholder sentiment for the next six months, as per National Real Estate Development Council and Knightfrank consumer sentiment index.
The Current sentiment score has declined marginally from 62 in the second quarter of 2022 to 61 in the third quarter of 2022. However, the score has largely remained above 50 since its inception.
Also, The Future Sentiment Score, which measures stakeholder perceptions for the real estate sector over the next six months, has decreased from 62 in Q2 2022 to 57 in Q3 2022.
In the past four years, multiple market forces have impacted the sentiments of both homebuyers and developers.
However, because of the headwinds caused by the high rate of inflation and geo-political tensions, the Future Sentiment Index has shown a marginal decline and that could influence the developers’ sentiment in general in the next few quarters, he added.
The overall volume witnessed across the top eight Indian cities each quarter mirrored the trajectory indicated by the Future Sentiment Score in the preceding quarter, the report said.
It also said that the Current and the Future Sentiment score have moderated in Q3 2022 as stakeholders exercise caution as the impact of the global economic headwinds on the Indian economy is yet to play out.
The housing affordability has shrunk further after the repo rate hike in September 2022.
Residential launches have an even higher degree of sensitivity to Future Sentiment score.
As per report findings, 65 per cent and 62 per cent variation in residential launches and sales respectively, can be explained by the Future Sentiment score.
The volume of residential sales and launches which have declined sequentially from Q2 2022 to Q3 2022, are likely to shrink further in Q4 2022 on both parameters. This is not surprising, as the impact of the cumulative repo rate hike of 190 basis points is yet to be passed on fully to homebuyers, said the report.
“After increasing the repo rate sequentially over the past few months, the RBI will likely increase the key policy rate again in December. But the sequential rise in repo rate has very little impact on mortgages in the affordable housing segment,” said Rajan Bandelkar, President, NAREDCO.