The Century Real Estate Research Initiative (CRERI) run by Indian Institute of Management Bangalore (IIMB) has developed the first robust leading indicator of real estate sentiments beginning with the Indian residential market.
Research on real estate in India is in its infancy in spite of it being a major asset class estimated to contribute about 6.3% of India’s GDP in 2013 through private residential investment and consumption spending on housing services.
The National Housing Board’s RESIDEX and RBI’s Housing Price Index (HPI) are currently the only available indexes tracking the Indian Real Estate Markets. There is, however, no credible and impassionate tracking of the sentiment of residential real estate players in India currently and IIMB-CRERI aims to fill this gap.
The first pilot survey was carried out in Q2 2013. Below results are a comparison of Q2 and Q3 survey results.
Survey results over the last two quarters indicate that home buyers across the nation expect real estate prices to fall over the next six months. The aggregate Housing Sentiment Index (HSI) dropped to 93 in Q3 2013 from 117 in Q2 2013, a drop of over 20%. Buyers in Bangalore expect prices to marginally increase (HSI 106), while in all the other seven cities surveyed, buyers expect prices to fall with Mumbai having the lowest HSI score of 81. Hyderabad experienced the steepest sentiment drop of 34% Q/Q owing to the Telengana issue.
Sentiment IndexOne is not only influenced by individual capabilities like earning potential and disposable income, but also by external factors like availability of home loans, strength of the job market, government regulations and tax concessions. Hence, gauging the sentiment and moods of buyers will also lead to an understanding of the health of the economy and the role that regional and national governments play.
Since the purpose of the HSI index is to capture leading sentiment, diffusion index has been chosen as the ideal calculation methodology. Diffusion index methodology is used to accurately measure economic turning points. A number above 100 indicates that respondents vote in favour of price increase and a value below 100 indicates price decrease; 100 being the neutral value.
HSI scores from quarter to quarter will hence track buyer sentiment changes across time.
Numbers talk
Research on real estate in India is estimated to contribute about 6.3% of India’s GDP in 2013
The Housing Sentiment Index (HSI) saw a drop of 20% from Q2 to Q3 in 2013.
Hyderabad experienced the steepest sentiment drop of 34%, owing to the Telangana issue.
source: http://www.dnaindia.com / DNA / Home> Bangalore> Report / by DNS Correspondent / Agency:DNA, Place:Bangalore / Thursday – October 24th, 2013