The current sentiment score has reached a new high since the inception of the Index eight years ago and is marginally higher than the score achieved in Q3 2021.
Despite the ongoing challenges of the third wave of COVID-19, Current Sentiment Index Score of the real estate sector has notched up to an all-time high of 65 in Q4 2021. The previous high reached was a sentiment score of 63 in Q3 2021. This improvement in the Current Sentiment Score is on account of the reduced uncertainty on the economic front, leading to stability in demand in the real estate sector, according to Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index – Q4 2021 (October – December 2021).
The Future Sentiment score, that gauges the stakeholders’ expectation in the short to medium term, also remains in the optimistic zone, but has dipped from 72 in Q3 2021 to 60 in Q4 2021. It has fallen below the Current Sentiment Score for the first time in the history of the index as fear of restrictions due to the Omicron variant in December 2021 led to a cautious outlook for the future, mainly towards residential real estate supply and prices.
With respect to the Economic outlook, 75% of respondents in Q4 2021 expect the overall economic momentum to remain stable over the next six months, while in terms of Credit Availability outlook, 60% of the respondents expect the credit situation to maintain status-quo over the next six months, while 37% expect it to increase during the period.
Current and Future Sentiment Scores Q4 2021
Commenting on the same, Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “While good demand conditions prevail for the real estate sector, stakeholders are adopting a cautious approach in the wake of the uncertainty arising from the third wave of COVID -19. Thus far the economic, social and human cost of the pandemic has been very high. Therefore, the entire country is currently awaiting to see the complete extent of the ongoing wave. Having said that, businesses and consumers have adapted better to these disruptions, which reflects in India’s 9.2% growth estimate for Gross Domestic Product (GDP) in 2021-22. The real estate sector has demonstrated an indomitable spirit and has remained robust in the last 5 quarters mostly led by the residential sector growth.”
“Home loan interest rates are at a historic low and the RBI’s firm assurance in maintaining the status quo has further boosted demand in the market. The segment has also been supported by conducive government policies keeping market sentiment buoyed. In terms of the commercial real estate sector, the segment retained its momentum from the previous year as corporates continue to sign up for new spaces for their future growth as demonstrated by the robust hiring in the last 3- 4 quarters,” he added.
Compared to Q3 2021, the South and East Zones’ Future Sentiment score has inched up in Q4 2021. The Future Sentiment score for South Zone increased to 64 in Q4 2021 from 62 in Q3 2021 as key southern markets recorded good traction in both office and residential sectors, whereas, for the East Zone the score rose from 57 in Q3 2021 to 58 in Q4 2021. The North and West Zones remained optimistic with scores of 57 and 56, respectively, in Q4 2021. As the Omicron variant of COVID-19-related risks unfold, stakeholders in these zones remain cautiously optimistic for the near term.
Sanjay Dutt, Joint Chairman, FICCI Real Estate Committee, and Managing Director & Chief Executive Officer – Tata Realty & Infrastructure Ltd, said, “2020 and 2021 can be coined as historic years for real estate. While the pandemic disrupted the sector globally, it also presented an opportunity to take a step back and put in place building blocks for long-term sustainable growth. The commercial real estate is now focused on wellness besides sustainability & optimisation. It is now a hybrid work environment. The homes are now all about liveability supported by workability. With housing affordability in India at its decadal best, residential sales registered 59% growth. On the commercial side, leasing activity is again ramping up due to robust underlying demand from IT/ITES and global MNCs, augmented by a surge in smart cities and CBDs. As we deal with each wave more confidently, I am sure that we are on the cusp of a very exciting and unprecedented cycle of real estate growth.”
On the Office Market outlook, 61% respondents in Q4 2021 opined that office leasing will remain stable over the next 6 months. Stakeholder outlook for office rents improved in Q4 2021. Compared to Q3 2021 – when 27% respondents felt office rents may increase in next six months – this time, 47% opined the same. In terms of new office supply, 88% of the Q4 2021 respondents are of the opinion that new office supply will either remain stable or will witness an increase over the next six months.
On the Residential Market Outlook, 72% of the Q4 2021 survey respondents opined residential sales to remain stable over the next six months, while 75% of surveyed stakeholders fear new supply may decrease in the next six months. An overwhelming majority, 62% of the respondents, expect a decline in residential prices over the next six months due to the Omicron virus related disruptions. At a time when the residential price increase was coming to the fore, the ongoing third wave disturbances have impacted stakeholder sentiments. Even though the Omicron variant related disruptions on the real estate sector are yet to be felt, the stakeholders remain optimistic, yet prudent about the next six months.
Commenting on the Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index – Q4 2021 report, Rohit Poddar, Managing Director, Poddar Housing & Development, said, “I am optimistic that we are on the verge of a very exciting and unprecedented cycle of real estate expansion as we boldly cope with each wave. I am glad to know that as per Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index – Q4 2021, India’s Current Sentiment score has climbed from 63 in Q3 2021 to 65 in Q4 2021, indicating that the real estate sector has had a steady comeback in 2021. This apparent third wave of Covid has had a significant impact on the Future Sentiment score, which has dropped from 72 in Q3 2021 to 60 in Q4 2021. However, we must point out that it is still in the optimistic range, and that it is only transitory, as it will rise again shortly. We hope to build on last year’s momentum and make 2022 a benchmark year for the real estate industry.”
