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FICCI-Knight Frank
REAL ESTATE SENTIMENT INDExQ4 2013The real estate sentiment index is jointly developed by FICCI
and Knight Frank India. The objective is to capture the
perceptions and expectations of the industry leaders in
order to judge the sentiment of the real estate market.
FOREWORD
Slow and steady wins the race -
a saying that holds true for the
Indian economy which has
gradually positioned itself as a
preferred business destination.
Giving fuel to this growth, has
been the real estate sector which
despite facing hurdles at every
nook and corner has certainly
played the role of an active
catalyst.
But it’s time we break loose of the usual practice of
analyzing real estate merely from the perspective of
customers, and adopt a wider frame to include other major
players of the game - the supply side stakeholders that
include developers, contractors, financial institutions, funds
to name a few and gauge their sentiments with the help of
structured and robust survey findings.
Therefore, I take this opportunity to present India’s first of its
kind real estate sentiment index report in association with
the Federation of Indian Chambers of Commerce & Industry
(FICCI) which aims at bringing to light the thoughts, beliefs
and expectations of the supply side stakeholders that
together determine the health of the real estate sector.
This quarterly report is an attempt to bridge the gap between
the supply and demand side and bring them onto a common
platform.
Hope you find this report useful and relevant.
I would love to hear back from you.
Shishir Baijal
Chairman & Managing Director
Knight Frank India
FICCI-Knight Frank
REAL ESTATE SENTIMENT INDExQ4 2013
Real Estate sector has undergone
unprecedented change in the last
two decades and has been at the
forefront of the Indian
Government’s agenda on account
of its potential to propel economic
growth significantly. It is one of the
fastest growing sectors and
constitutes about 11 per cent of the
GDP. Across all its segments, be it
residential, office space or
commercial, there has been enhanced development activity
driven by growth of various sectors of the Indian economy.
Real Estate markets are highly susceptible to sentiments
and plays a very significant role in the decision making
process of investors, developers and consumers. The jointly
developed FICCI-Knight Frank sentiment index aims to
capture the perceptions and expectations of real estate
leaders, helping them gauge the market sentiments. This
sentiment tracker would be a ready reckoner for the
stakeholders of this industry to gauge the pulse of real
estate industry leaders.
I would like to thank all those who have participated in the
survey and expressed their views. I hope this initiative is a
step forward in bringing value to the industry and engaging
with them to depict the reality of the realty sector.
Dr. A. Didar Singh
Secretary General
FICCI
FINDINGS
Current real estate sentiment score stands at 33
implying that stakeholders feel the current real estate
market is somewhat worse compared to six months
back
Future sentiment score at 50 reflects a neutral view
indicating a status quo in the coming six months
PART I: India Real Estate Sentiment Index
100
90
80
70
60
50
40
30
20
10
0
33
CURRENT
OP
TIM
ISM
PE
SS
IMIS
M
The index is based on a quarterly survey of key stakeholders including developers, private equity funds, banks and
NBFCs. The survey comprises questions pertaining to economy, project launches, sales volume, leasing volume, price
appreciation and funding. Respondents choose from the following options for which weights have been assigned
a) Better (100 points) b) Somewhat Better (75 points) c) Same (50 points) d) Somewhat Worse (25 points) e) Worse
(0 Points). The index is calculated by taking the weighted average score of the percentage of responses in each of
these options. Hence a score of 50 represents a neutral view; a score above 50 demonstrates a positive outlook
whereas a score below 50 shows a negative sentiment. In order to present a holistic view on the real estate industry
two indices are computed. The current sentiment index indicates the respondent’s assessment of present scenario
compared to six months back and the future sentiment index represents the expectations in the coming six months.
The two indices have to be read independently and will have a time series going forward. The survey was conducted
during October-November 2013.
Approach
100
90
80
70
60
50
40
30
20
10
0
50
FUTURE
OP
TIM
ISM
PE
SS
IMIS
M
FICCI-Knight Frank
REAL ESTATE SENTIMENT INDExQ4 2013
Q4 2013 Q4 2013
FINDINGS
The real estate market has worsened compared to six months
back
Developers are of the opinion that the condition of the Indian
real estate market will not deteriorate in the next six months
Financial institutions, however feel that the real estate market
is still not bottomed out
OPTIMISM ON ECONOMY AND RESIDENTIAL SECTOR
100
90
80
70
60
50
40
30
20
10
0
Economy Residential Launches
Residential Sales
Residential PriceAppreciation
New OfficeSupply
Leasing Volume
Office Rental Appreciation
Funding
Current Future
36
6151
38 4637332629
47
33
53
3836
ZONAL SENTIMENT SCORE
Current Future
FINDINGS
The stakeholders perceive that the
present residential and office markets
are comparatively weaker than what
they were six months back
Majority of the respondents are
optimistic about the economic scenario
and expect improvement in the next six
months
There is an evident optimism for the
residential sector be it launches, sales
volume or price appreciation in the
coming six months
Office sector on the other hand is
expected to be pessimistic in the
coming two quarters
Credit lending/ funding situation
appears worse now compared to six
months back and is not expected to
improve in the near future
FINDINGS
STAKEHOLDER SENTIMENT SCORE
FUTURE
34 50
CURRENT FUTURE
27 47
DEVELOPERCURRENTFINANCIAL
INSTITUTIONS
38
47
33
50
31
50
34
45
NORTH
EAST
WEST
SOUTH Current sentiment is pessimistic across all
zones
Respondents from the east and south are
slightly more optimistic about the future
compared to the other zones and expect the
real estate development to remain stable
OP
TIM
ISM
PE
SS
IMIS
M
54
46
FICCI-Knight Frank
REAL ESTATE SENTIMENT INDExQ4 2013
FICCI-Knight Frank
REAL ESTATE SENTIMENT INDExQ4 2013
SCORE >50: OptimismSCORE 50: Same/NeutralSCORE <50: Pessimism
SCORE >50: OptimismSCORE 50: Same/NeutralSCORE <50: Pessimism
PART II: India Real Estate OverviewWe have considered seven major cities i.e. National
Capital Region, Mumbai Metropolitan Region, Pune,
Chennai, Bengaluru, Hyderabad and Kolkata to
represent the Indian real estate scenario.
RESIDENTIAL INDEX: UNIT LAUNCHES AND ABSORPTION
Launches Absorption
Project launches and absorption peaked in 2010
post the Global Financial Crisis (GFC) and have
been trending down since then
Drastic fall has been witnessed in the last three
quarters of 2013
Residential launches and sales volume are
nearing 2009 levels
FINDINGS
FICCI-Knight Frank
REAL ESTATE SENTIMENT INDExQ4 2013
300
250
200
150
100
50
100
7464 65
124139
157
182 188
138
117 113
134 129118
136127
141
95
69
135 137146
162
214 220
261253
214
195
178 181 185195
202
219
188
163
105
Q1 Q2 Q3 Q4
2009
Q1 Q2 Q3 Q4
2010
Q1 Q2 Q3 Q4
2011
Q1 Q2 Q3 Q4
2012
Q1 Q2 Q3 Q4
2013
Ind
ex
Va
lue
: (B
ase
Q1
20
09
=10
0)
OFFICE SPACE INDEX: ABSORPTION
Office space leasing volume picked up post
GFC and peaked in the year 2011 and has been
trending downwards since then
Despite a contraction in the office space
demand, overall absorption numbers are still
significantly ahead of 2009 levels
Absorption volume follows a cyclic pattern and
seem to peak in the second quarter of each
year barring 2012
FINDINGS
FICCI-Knight Frank
REAL ESTATE SENTIMENT INDExQ4 2013
Absorption300
250
200
150
100
50
154
100109 96
152
234
167147
164
280
186
128
184 178174
85105
217
144132
Q1 Q2 Q3 Q4
2009
Q1 Q2 Q3 Q4
2010
Q1 Q2 Q3 Q4
2011
Q1 Q2 Q3 Q4
2012
Q1 Q2 Q3 Q4
2013
Ind
ex
Va
lue
: (B
ase
Q1
20
09
=10
0)
150
140
130
120
110
100
90
80
160
150
140
130
120
110
100
150
140
130
120
110
100
90
150
140
130
120
110
100
90
134 134 139142
147 148
154 155
98 100 99102 104
107110
113
121126
132 134
142 142145 146
HYDERABAD
NCR
CHENNAI
RESIDENTIAL PRICE INDEX (BASE Q1 2009: 100)
MMR
Q1 Q2 Q3 Q42009 2010
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013
Q1 Q2 Q3 Q42009 2010
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013
Q1 Q2 Q3 Q42009 2010
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013
Q1 Q2 Q3 Q42009 2010
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013
100103 106
112115 116 116
124 122128 129
133
10095
91 90 89
94 9591 91
95 95 96
125128
130 131 131 133 136 138
100 98 97103
113118 118 119
98
108 108 108
10097 96 95
9094
99101
106
114
9693
FICCI-Knight Frank
REAL ESTATE SENTIMENT INDExQ4 2013
FINDINGS
Mumbai and Pune are forerunners in price appreciation
during 2009-2013
Pune shows the maximum appreciation amongst the
IT/ITeS driven markets of Bengaluru, Hyderabad and
Chennai
The NCR market prices trended downwards till the end
of 2010, post which they have risen more than any
other major residential market in India
Hyderabad has substantially underperformed
compared to other markets
160
150
140
130
120
110
100
121
134 133 134135 137 137 139
KOLKATA
Q1 Q2 Q3 Q42009 2010
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013
100 100 101 103108 106 109
117 119
100
120
150
140
130
120
110
100
90
BENGALURU
Q1 Q2 Q3 Q42009 2010
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013
118121
124127 127
132136 138
10098
101 102 103 104 106
113 115
98 99 99
160
150
140
130
120
110
100
PUNE
Q1 Q2 Q3 Q42009 2010
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013
100103 105 108
111 114 117120
123
100 100
127130 133
138140
144147
150
123
120
FICCI-Knight Frank
REAL ESTATE SENTIMENT INDExQ4 2013
OFFICE SPACE RENT INDEX (BASE Q1 2009: 100)
95 95 95 95 95
98
95
98
120
115
110
105
100
95
90Q1 Q2 Q3 Q4
2009 2010Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2011 2012Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2013
120
115
110
105
100
95
90Q1 Q2 Q3 Q4
2009 2010Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2011 2012Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2013
120
115
110
105
100
95
90Q1 Q2 Q3 Q4
2009 2010Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2011 2012Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2013
HYDERABAD
NCR
CHENNAI
120
115
110
105
100
95
90Q1 Q2 Q3 Q4
2009 2010Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2011 2012Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2013
MMR
10098
9593
90
9395
93 9395 95 95
105106 106 106 107 106 107 107
100102
99101
105107 106
99 99101 102
106
102 102100 100 98 98
95 95
100 98102
98 98 100 100102 102
105 105 105
99 100 99101 100
98101
98100 101
99
96 95 94
9896
100 9999
96
FICCI-Knight Frank
REAL ESTATE SENTIMENT INDExQ4 2013
120
115
110
105
100
95
90
120
115
110
105
100
95
90
120
115
110
105
100
95
90
FINDINGS
Office markets in India have seen minor appreciation
compared to residential markets
Bengaluru office market has seen the maximum rental
appreciation during the analysis period
All IT/ITeS driven markets have witnessed rental
weakening since 2009 with the exception of Bengaluru
Mumbai office market has managed to sustain the
rentals with marginal appreciation of 7% since 2009
NCR office rentals remained stable with a slight
downward bias
Q1 Q2 Q3 Q42009 2010
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013
Q1 Q2 Q3 Q42009 2010
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013
Q1 Q2 Q3 Q42009 2010
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013
KOLKATA
BENGALURU
PUNE
108110
113
115 115
118 118 118
100 103
105
100 100 100 100 100 100 100
105 105
95 95
98
95 95
98 98 98100
98
95
98
9395 95 95 95 95 95 95
100102 100
104 104102 102
104
10098 9698 98 98
10098 98 98 9898
FICCI-Knight Frank
REAL ESTATE SENTIMENT INDExQ4 2013
Notwithstanding the economic risks associated with
the election code of conduct and impending
election, stakeholders expect an economic
expansion during the next six months. However, we
believe that political compulsions will supersede
any economic urgency leading to a delayed
economic expansion during this period.
As per the stakeholder survey, not just supply and
demand for residential property, but also price is
expected to witness an upward movement during
the next six months. However, if an analogy is drawn
with the 2009 general election period, the
determinants of housing demand are strikingly
different this time around. Property prices have risen
faster than the growth in household income or
general inflation during this period. Interest rates
are much higher (Repo rate: May’09: 4.75%, Jan’14:
8.00%). Lack of any meaningful improvement in
determinants of housing demand, according to us
means the situation will remain the same.
Commercial Real Estate (CRE) is an area where
stakeholders are skeptical and anticipate a
contraction in demand, supply as well as prices
during January’14 to June’14. We believe a larger
magnitude of CRE project completions at a time
when business growth and employee addition
remain weak, will translate in to marginally higher
vacancy level in the Indian office market and
continue to put pressure on rents. Therefore, the
stakeholder survey results are in line with our
assessment of the CRE market.
Outlook
Knight Frank India in.knightfrank.com
Dr. Samantak Das
Chief Economist & Director - Research
Disclaimer: This report is published for general information only and not to be relied upon in any way. Although high standards have
been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability
whatsoever shall be accepted by FICCI or Knight Frank for any loss or damage resultant from any use of, reliance on or reference to the
contents of this document.
As a general report, this material does not necessarily represent the view of FICCI and Knight Frank in relation to particular properties or
projects. Reproduction of this report in whole or in part is not allowed without prior written approval of FICCI and Knight Frank to the
form and content within which it appears.
Ankita Nimbekar
Consultant - Research
FICCI ficci.com
Mousumi Roy
Senior Director & Head Real Estate -
Urban Infrastructure
FICCI-Knight Frank
REAL ESTATE SENTIMENT INDExQ4 2013
