The IIMB Magicbricks Housing Sentiment Index (HSI) for the 3rd quarter of 2014-15 was sharply down across all 10 cities, ending the cautious optimism witnessed so far this year. Ahmedabad, Delhi and Gurgaon witnessed over 25% correction in sentiments compared to the previous quarter.
January 14 2015: The Housing Sentiment Index (IIMB-Magicbricks HSI) assessed by IIM Bangalore and Magicbricks, forecasts that homebuyers across all 10 cities surveyed expect real estate prices to drop over the next six months. The aggregate Housing Sentiment Index (HSI) measured across the 10 cities dropped sharply by 29% this quarter to 81. (An HSI score of 100 suggests the prices would remain static). The IIMB Magicbricks buyer sentiment survey includes the cities of Ahmedabad, Bengaluru, Chennai, Delhi, Gurgaon, Hyderabad, Kolkata, Mumbai, Noida and Pune.
“While there is an overall drop in consumer sentiments, the Indian real estate market continues to see robust demand for properties in the affordable range of Rs 20-40 lakh from end-users. Ease in minimum capital investment and reduction in minimum built area of projects to procure FDI is likely to address demand and keep the real estate market attractive in the medium to long-term” explains Sudhir Pai, Business Head, Magicbricks.
HSI Snapshot by City
City HSI Trend
Ahmedabad 76 ↓
Delhi 78 ↓
Gurgaon 80 ↓
Mumbai 81 ↓
Hyderabad 95 ↓
Chennai 97 ↓
Pune 100 ↓
Bangalore 103 ↓
Kolkata 103 ↓
Noida 109 ↓
High inventory levels, soaring prices and circle/guidance rate increases were some of the compelling reasons for consumers’ pessimism.
Delhi witnessed a 32% drop in sentiments. The NCR has been plagued by stalled infrastructure projects, builders facing legal action, increase in circle rates by up to 20% in some regions and high levels of unsold inventory. Inspite of all this, developers are unwilling to bring down prices while consumers eagerly await interest rate reduction.
Bengaluru witnessed a 17% drop in sentiments in addition to the 13% drop witnessed last quarter. Sentiment in Bengaluru, once soaring, is now down to neutral levels. Guidance Values for properties were revised upwards in November 2014, resulting in increased registration costs for buyers.
Ahmedabad witnessed high volatility in the past few quarters dropping by 33% to 76 as compared to a rise of 30% in the previous quarter.
The Seller Survey indicates that sellers continue to be bullish about markets with an HSI of 154. Of the sellers, 29% are doing so to book profits while 25% want a bigger accommodation and 49% are looking to sell apartments/flats.
Key TakeAways of the Oct-Dec 2014 Report
v The National HSI plunged by 29% to 81 this quarter
v All 10 cities witnessed a drop in sentiments with Ahmedabad and Delhi witnessing over 30% reduction
v The Seller Index witnessed a marginal decline to post an HSI of 154
v 84% of respondents earn less than Rs 20 lakh per annum
v 47% respondents are looking for property below Rs 40 lakh
v 51% currently live in rented accommodation
v 47% look to buy property within the next 6 months
v 54% are waiting for prices to come down
v 66% prefer to purchase flats/multi-storey apartments
v The average wait time decreased to 8.2 months from 9.1 months in the previous quarter
Summarising the findings, Uma Sitaraman, Lead Researcher, IIMB-Century Real Estate Research Initiative (CRERI) stated, “Inspite of high inventory levels in major cities, real estate prices continued to remain high. Registration costs are now higher in some states due to circle rate revisions. Real Estate as an asset class has underperformed the equity markets in the past year and needs a boost, both in terms of accelerated infrastructure development and reduction in interest rates.”
The complete IIMB Magicbricks HSI report is available for free download: http://www.magicbricks.com/iimb-hsi/
About IIMB Magicbricks HSI:
The IIMB Magicbricks HSI is a sentiment index of the Indian real estate market that aims to capture the buyer ‘mood’ and serve as an indicator of residential real estate market performance. The first inaugural report was released in the month of October 2013 and captured sentiments across eight cities. The latest report covers 10 cities and includes a comparative Seller’s Survey as well.
IIMB Magicbricks HSI Indexation Methodology:
The IIMB Magicbricks HSI is based on the “Diffusion Index” methodology, widely used to capture market sentiments globally. HSI is calculated by taking the difference of the total positive and negative sentiments after adjusting the magnitude of neutral responses and other biases inherent in survey-based work. The value of HSI can range from 0 to 200. A score of 100 represents neutrality, meaning people do not expect house prices to either increase or decrease. A score of 200 indicates that all respondents expect house prices to increase. A score of 0 indicates that all respondents expect house prices to decrease.
This index is based on an online survey of prospective homebuyers after careful screening by Magicbricks and IIMB. The survey questionnaire has been designed to accurately capture buyer sentiment on house prices, the degree to which he/she thinks house prices will move, micro market preferences within each city and basic demographic information including buyer preferences for type of property and financing methods. A seller survey was introduced last quarter to compare the buyer and seller sentiments.
IIM Bangalore-Century Real Estate Research Initiative (IIMB-CRERI) is a dedicated research initiative to pursue scientific research on the Indian real estate industry. It partners with industry/government organisations to collect data and develop research projects that are aimed to improve understanding of this vital sector of the economy. The initiative complements work at IIMB’s other leading centres such as the Centre for Public Policy. As a leading international management school in India, IIMB has strong linkages to the corporate sector, CSOs and the government. Its rigorous research projects are defined by structured analytical processes and constant engagement with market participants.
Magicbricks.com is India’s No.1 property portal. With monthly traffic exceeding 10 million visits and with an active base of over 7 lakh property listings, Magicbricks provides the biggest platform for buyers and sellers of property to connect with each other in a clear and transparent manner. The vision is to be a one-stop shop for property buyers and sellers. With this in mind, several product features have been innovated, content and research services, which have helped to build the largest audience pool. Magicbricks is part of The Times of India Group, India’s biggest media conglomerate.