The score had turned negative in Q1 2020 after the COVID-19 outbreak and had remained in the pessimistic zone during Q2 2020, as the impact of the stringent lockdowns became apparent on businesses.
The Current Sentiment score jumped considerably to 54 in Q4 2020 from 40 in Q3 2020, entering the optimistic zone for the first time in 2020, reveals the 27th Edition of Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index Q4 2020 (October – December 2020) Survey. The score had turned negative in Q1 2020 after the COVID-19 outbreak and had remained in the pessimistic zone during Q2 2020, as the impact of the stringent lockdowns became apparent on businesses. It revived in Q3 2020 on the back of improving economic health and pent-up demand.
The residential segment outlook was supported by pent-up demand, festive demand, multi-decadal low home loan interest rates, attractive residential prices and state government incentives such as reduction of stamp duty in Maharashtra. Residential sales reached pre-COVID levels (2019 quarterly average) by Q4 2020.
The Future Sentiment score also climbed up to 65 in Q4 2020 from 52 in Q3 2020, mirroring the strong recovery expectations prevalent in the market. Stirring demand and festivities of Q4 2020 gave a strong fillip not just to the real estate sector but also to the economy at large. The improvement in high-frequency indicators recorded since September 2020 continued in December 2020 as well. Goods and Services Tax (GST) collections in December 2020 are at a record high whereas the Purchasing Managers’ Index (PMI) for manufacturing recorded a fifth straight month of expansion.
Geographically, the western part of the country saw the sharpest jump in Future Sentiment Index. This zone’s Future Sentiment jumped to 66 points in Q4 2020 from 47 points in Q3 2020. With respect to stakeholders, both developers and non-developers (which include banks, NBFCs and PE funds) recorded an improvement in Future Sentiment score in Q4 2020.
OVERALL SENTIMENT SCORE
On the macroeconomic front, 82% of the survey respondents opined that the economy would grow further in the coming six months as opposed to the 57% respondents with the same view in Q3 2020. Similarly, the share of survey respondents with the opinion that economic health will worsen in the next six months went down substantially to 7% in Q4 2020 from 31% in Q3 2020. In terms of credit availability, 87% of the Q4 2020 survey respondents believed that the funding scenario would either improve or continue to remain the same over the next six months.
Further, 77% of the Q4 2020 survey respondents were of the opinion that residential sales would increase over the next six months, up from 66% in Q3 2020. With regards to the office market, 60% of the Q4 2020 survey respondents, up from 47% in Q3 2020, believed that office leasing activity would increase over the next six months.
Commenting on the same, Shishir Baijal, CMD, Knight Frank India, said, “Both the Current and Future Sentiment scores in Q4 2020 have seen great surge in the latest survey backed by revival in both residential and office market real estate that have been highly encouraging. The sector saw a lift in the market’s mood and increased stakeholder expectations of a stronger recovery in the next six months. As we begin our journey into 2021 with a positive outlook, it is important to closely watch the performance of the key economic indicators in the coming months to check the sustainability of the growth seen in the last two quarters of 2020. Equally crucial is the development of the vaccine and its widespread availability for the masses. These two factors will largely determine the performance of the real estate sector in the coming months.”
Dr. Niranjan Hiranandani, National President – NAREDCO and ASSOCHAM, and Founder & MD, Hiranandani Group, said, “The survey mirrors recovery expectations of not just real estate, but the economy. Investments in real estate over the recent past reflect positive sentiments on part of investors, domestic as also global, on the resurgence in the Indian economic growth story. This is a clear indicator of the bullish growth story of the Indian real estate and reflects on the growth prospects of 270 allied industries as also job creation. Recently, we have seen this investment being in the office spaces segment, which reflects the confidence of investors in the Indian GDP’s positive growth potential. Stakeholder outlook for the office market has improved substantially in Q4 2020 as leasing activity gained momentum.”
The residential market outlook has revived further in Q4 2020, across all parameters, reflecting the increased traction in this segment. “The impact of renewed consumer demand for residential realty has resulted in high levels of registration data, these transactions have lifted market sentiment. This bull run will be sustainable, growing through 2021, in the backdrop of the anticipated positive Union Budget – scripting the real estate revolution in India,” Hiranandani added.
It may be noted that 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’.