Covid19 second wave hits realty sector future sentiment, vaccination progress eyed

The onset of the second wave of the pandemic has influenced the future sentiments of the real estate stakeholders in the country despite higher sales momentum and rise in institutional investments witnessed in the last few months. The progress in Covid19 vaccination drive is expected to dictate the trend hereon.

The Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index January-March 2021 Survey saw a decline in future sentiment score to 57 from 65 in the December quarter owing to uncertainties resulting from the spread of a 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 December quarter to 57 in March quarter on the back of healthy momentum in the commercial and residential real estate segments during Q4 2020 and during January-February 2021.

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’. The survey was conducted on April 12.

“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,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

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According to him, 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.

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 reflect caution on the future of real estate for the next six months, even if their scores remain in the optimistic zone.

“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 ensure food, shelter and daily wages along with all the safety measures and vaccination shots,” said Niranjan Hiranandani, National President, NAREDCO.

According to him, 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.

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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. 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.

“The year 2020 was the year that changed everything, and 2021 will be the year where change will become ‘better’ through resilience, digital insurgency, and innovation. While 2021 may not evade all the challenges of a pandemic-affected economy, the planning and implementation for a sector-wide recovery have already been laid out. Backed by positive economic fundamentals, healthy demand and quality supply infusion across sectors, India’s real estate sector is prepared for robust growth,” said Sanjay Dutt, Joint Chairman, FICCI Real Estate Committee.

The office market was showing a healthy recovery from the December quarter. However, the second wave of COVID and the resultant mobility restrictions and possible lockdowns in some cities have adversely impacted office occupancy levels. This has resulted in weakening of the office market outlook for the next six months.

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.

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