The onset of the second wave of the Coronavirus pandemic has dampened future sentiments of the real estate stakeholders in the country, according to the Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index Q1 2021. The 28th edition of the Sentiment Index (January-March 2021) survey noted that the ‘Future Sentiment score’ saw a decline from 65 in Q4 2020 to 57 in Q1 2021 due to uncertainties resulting from the second wave of COVID-19 infections. However, it remained in the optimistic zone. The ‘Current Sentiment score’ recorded a marginal improvement, inching up from 54 in Q4 2020 to 57 in Q1 2021. This improvement can be attributed to the healthy momentum in the commercial and residential real estate segments during Q4 2020 and during January-February 2021.
Hampered by the second COVID wave concerns, the Future Sentiment score (for the next six months) of stakeholders has fallen across regions, even while it remains in the optimistic zone. Similarly, the Q1 2021 outlook of supply-side stakeholders reflects caution on the future of real estate for the next six months, even if their scores remain in the optimistic zone.
Overall sentiment score: Future sentiment and current Sentiment
Note: A score of above 50 indicates ‘Optimism’ in sentiments, a score of 50 means the sentiment is ‘Same’ or ‘Neutral’, while a score below 50 indicates ‘Pessimism’.
Source: Knight Frank Research; Please note: Data for 2018 is available for Q1 and Q4 only.
- The South Zone has seen a marginal decline from 66 in Q4 2020 to 63 in Q1 2021, while the score for North Zone has fallen from 58 in Q4 2020 to 56 in Q1 2021.
- The Future Sentiment score of the West region witnessed a significant drop from 66 in Q4 2020 to 53 in Q1 2021, while the score for the East zone has fallen from 65 in Q4 2020 to 53 in Q1 2021.
With the substantial increase in COVID cases since March 2021, the outlook for residential launches and sales has softened in Q1 2021. Even so, the share of respondents that expect the residential market to grow or remain steady in the next six months is more than 80%, across parameters of launches, sales and prices.
Shishir Baijal, chairman and managing director, Knight Frank India said, “The sentiment of stakeholders remained cautious for both Current and Future Sentiment scores in Q1 2021, owing primarily to the second wave of the pandemic, resulting in economic uncertainties. The real estate sector had seen a strong bounce-back during the last few quarters, which has kept the future sentiment of stakeholders in the positive zone. With the central government refraining from a second nationwide lockdown, the sector would be hoping to hold onto the progress made so far. As some regions have already announced movement restrictions, it will be imperative to observe the key economic indicators in the coming months to check the sustainability of the growth that the sector has already achieved. The speed at which the inoculation drive is conducted, and the intensity of local restrictions placed will be proportional to the growth of the real estate sector’s growth in the coming months.”
Residential market outlook: Launches, sales and prices
- Even with the rising COVID infections since March 2021, the share of respondents that expect the residential market to grow or remain steady in the next six months is more than 80%, across parameters of launches, sales and prices.
- In Q1 2021, 65% of the survey respondents were of the opinion that residential launches will increase in the next six months. 26% respondents felt that new project launches would remain the same in the coming six months.
- On the demand front, 64% of the Q1 2021 survey respondents expect an increase in sales activity over the next six months. The share of respondents who expected the sales activity to continue at the same pace over the next six months jumped from 13% in Q4 2020 to 23% in Q1 2021.
- With regards to residential prices, 48% of the Q1 2020 survey respondents – up from 38% in Q4 2020 – believe that prices will increase over the next six months, while 43% were of the opinion that prices would remain the same.
Source: Knight Frank Research
Office Market Outlook: New Supply, Leasing and Rents
Similarly, the second wave of COVID and the resultant mobility restrictions and possible lockdowns in some cities has adversely impacted office occupancy levels. This has resulted in weakening of the office market outlook for the next six months.
- In Q1 2021, 58% of the survey respondents were of the opinion that the new supply in the office market would improve or remain the same in the coming six months.
- As far as rentals are concerned, 44% of the Q1 2021 survey respondents expect office rentals to remain steady over the next six months.
Source: Knight Frank Research
On the macroeconomic front, the pace of economic revival appears to have slowed down, with some key economic indicators showing weakening over the last two months. Influenced by the change in macroeconomic developments, stakeholder outlook on the overall economic momentum and on credit availability has turned cautious in Q1 2021.
“The dip in the future sentiment score in Q1 2021 mirrors the prevalent market uncertainties on account of the second COVID wave. However, there is no cause of worry for the industry, as it is well geared to mitigate the risk on ground. The ongoing production with uninterrupted supply chains will help the sector to rebound with more finished goods catering the discerning home buyers and the reverse migration of labourers is at bay due to ensured food, shelter and daily wages along with all the safety measures and vaccination shots. The business continuity plan is coping up with alternative digital platforms and leveraging innovative technologies to keep the sales momentum unhampered. Therefore, there will be a positive growth in the long run for Indian real estate,” said Niranjan Hiranandani, national president – NAREDCO and founder and managing director, Hiranandani Group.