Current real estate sentiment scores dip but future sentiment scores remain optimistic: Survey

The optimism in residential market outlook has continued in Q2 2021. More than 50% of the Q2 2021 survey respondents continue to expect an increase in residential launches and sales in the coming six months.

The residential real estate segment has recorded strong recovery across cities post the onset of the pandemic. Driven by the heightened need for home ownership, residential sales have gained momentum across ticket-sizes over the last year. Reflecting this positive performance, stakeholder outlook for the residential real estate segment has been recording a positive outlook since the past few quarters. This optimism was only slightly mellowed in Q2 2021 due to the second COVID wave exigencies, according to the 29th Edition of Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index Q2 2021 (April – June 2021).

As per the survey, the future sentiments of real estate sector stakeholders remained optimistic in Q2 2021 despite the second wave of COVID-19 that struck during this period. Further, the stakeholders’ reaction to the second pandemic wave was not as severe as it was during the first wave as indicated by the relatively lesser drop in sentiment scores in Q2 2021.

The Current Sentiment score has dropped from 57 in Q1 2021 to 35 in Q2 2021, but the drop is less intense than it was during the first COVID wave (Q2 2020) when the score had hit an all-time low of 22. The Future Sentiment score has inched down marginally from 57 in Q1 2021 to 56 in Q2 2021, continuing to remain in the optimistic zone. Here as well, the outlook of stakeholders reflects more resilience in Q2 2021 than in Q2 2020.

Market sentiments were severely hit by the second COVID wave which started in March 2021. While a nationwide lockdown was avoided this time, all states went through phases of partial to complete lockdowns during March to June 2021. This impacted economic activity of both residential and office real estate segments as has been captured by the fall in the Current Sentiment score for this quarter.

In terms of geography, the West zone saw the sharpest recovery in the Future Sentiment Score. This zone’s Future Sentiment score jumped from 53 in Q1 2021 to 60 in Q2 2021.  With the resumption of economic activity, future sentiments (for the next six months) of stakeholders have remained in the optimistic zone, across most regions.

Stakeholder outlook on office market saw an improvement in Q2 2021 especially with respect to leasing activity. In Q2 2021, 40% of survey respondents were of the opinion that office leasing activity would increase over the next six months, up from 34% last quarter. Around 21% of the Q2 2021 survey respondents, up from 15% in Q1 2021, expects office rents to increase in the next six months while 40% expect rents to remain stable.

The optimism in residential market outlook has continued in Q2 2021. More than 50% of the Q2 2021 survey respondents continue to expect an increase in residential launches and sales in the coming six months.

On the macroeconomic front, more than 80% of the Q2 2021 survey respondents continue to have an optimistic outlook for the economy in the coming six months. While on the credit availability front, stakeholder outlook has improved in Q2 2021 with 46% respondents – up from 41% in Q1 2021 – expecting an increase in the coming six months.

Commenting on the same, Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “The tragedy of the second wave of pandemic has pushed the overall industry sentiments down in the second quarter of 2021.  However, our learning from the first wave, as well as a less stringent lockdown in the second wave, have equipped us well to mitigate the severity of the economic ramification, showing some level of positive outlook among the stakeholders when compared to the dead low sentiment score of 22 during the same period last year.”

“The availability of vaccines, a robust vaccination programme, along with continued economic activities have been the primary reason for the optimistic future sentiment score, as compared to last year. The real estate sector is treading cautiously and acknowledges that there is latent demand for both office and residential sectors, albeit hindered by the prolonged pandemic,” he added.