Housing market bearish as budget fails to enthuse buyers

Since the union Budget was announced at the end of February, realty prices in eight out of ten cities surveyed for the IIMB Magicbricks Housing Sentiment Index (HSI) have seen a downward correction.

The IIMB Magicbricks HSI is based on the 'Diffusion Index' methodology, widely used to capture market sentiments globally.

Among the cities which witnessed correction, Noida topped the list with a 19-per cent fall in sentiment compared to the previous quarter.

The other 10 cities together witnessed over a 20 per cent correction since the general elections held in May 2014.

The Magicbricks buyer sentiment survey change since May 2014 to the present is as follows - Ahmedabad (-14per cent), Bengaluru (-30 per cent), Chennai (-29 per cent), Delhi (-30 per cent), Gurgaon (-38 per cent), Hyderabad (-25 per cent), Kolkata (-29 per cent), Mumbai (-20 per cent), Noida (-34 per cent), and Pune (-22 per cent).

 ''Budget 2015 did not address the expectations of the consumers and this is reflected in the consumer sentiment. Consumers are still in the wait-and-watch mode and are likely to take a decision once more clarity is visible on both market trends and monetary policy front,'' said Sudhir Pai, chief executive of  Magicbricks.

As per the survey, 48 per cent of home-buyers are waiting for prices to come down, reflecting the unaffordable levels to which property prices have soared in the last few years especially in Tier I cities.

Delhi NCR witnessed a 38-per cent drop in sentiment since May 2014. In spite of high unsold inventory, developers are unwilling to slash prices. Poor / stalled infrastructure, lawsuits against builders and increase in circle rates have resulted in subdued sentiments in this region across the last three quarters.

Bengaluru, the only city to post a positive sentiment all along, is now in neutral territory with HSI at 100, a drop of 30 per cent since May 2014. With no further reason for property prices to increase, investors have no reason to purchase property at this stage. Salary increases have remained subdued for the past one year making houses unaffordable.

Mumbai and Delhi witnessed slight upward corrections this quarter, but still remain in the negative territory (HSI 85 and 83 respectively).

Seller Survey
As for the Seller Survey, it indicated that sellers continue to be bullish about markets with an HSI of 146, a 9 per cent drop since elections.

Uma Sitaraman, lead researcher, IIMB-Century Real Estate Research Initiative (CRERI), said, ''Sentiments have been steadily falling the past few quarters primarily due to homes becoming unaffordable across major cities. Further drop in sentiment across 8 of the 10 cities after the union budget indicates that this sector has been largely ignored.

''The Union Budget has not addressed affordable housing at all. There was also no major announcement to bring cheer to the home buyer. There is a very visible supply demand mismatch and unless this is addressed, the housing markets are going to remain subdued. Interest rate cuts alone are not enough to attract buyers to the market at this stage,'' she added.