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Covid-19: Real estate sector outlook turns optimistic

Real estate sector outlook turns optimistic
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Real estate sector outlook turns optimistic

Highlights

Low loan rates, attractive offers propel residential home sales; Demand for office space picking up

Hyderabad: After six months of crisis due to coronavirus pandemic, the domestic real estate sector has reason to cheer. The outlook for the next six months has turned optimistic with signs of revival in demand, observes a survey by Knight Frank-Ficci-NAREDCO, as the 'Future Sentiment Score' rose to the optimistic zone at 52 points, up from 41 in the previous quarter.

As per the survey parameters, a score of above 50 signifies ''Optimism' in sentiments, a score of 50 means the sentiment is 'Same' or 'Neutral,' while a score below 50 shows 'Pessimism.'

Shishir Baijal, chairman and managing director of Knight Frank India, said: "An increase in real estate activities has been a great morale booster for the sector. Quarter 3, 2020 (July – September), saw residential sales volumes increase to 55 percent of pre-Covid levels, showing signs for revival. Low home loan rates and discounts/ attractive offers for residential homes, have pushed sales velocity in the third quarter. Even while the volumes are yet to catch up to the pre-Covid levels, the spurt has been instrumental in perking up sentiments. Similar positivity is visible for the office sector as well, where we have seen a revival of leasing activities."

Rajani Sinha, chief economist and national director (research), Knight Frank, adds: "With the economy unlocking, macro-economic parameters have started improving. Real estate sector has also started bouncing back in line with overall pick-up in the economy. Supply as well as demand parameters have improved for the real estate sector and that is getting reflected in improvement in the stakeholders' sentiments. Pick-up in demand and supportive measures from RBI and the government have aided in revival of sentiments for the sector." The 26th edition of survey on 'Real Estate Sentiment Index Q3 2020 Survey' for July- September period included developers, banks, financial institutions and private equity players operating in the sector. The 'Current Sentiments Score' improved to 40 points during the July-September period from a record low of 22 points in the previous quarter but remained in the pessimistic zone.

"The return of the end -users in the market, especially in the residential segment is a matter of cheer for the entire sector, as it indicates economic confidence and long-term commitments. The festive season in Q4 2020 is likely to further support the revival in real estate sector. We are hoping that the government and allied agencies will encourage this growth with more supportive decisions," remarked Shishir. Knight Frank attributed the revival in sentiments to the "remarkable upturn seen in the real estate business, especially in the residential segment, in the third quarter of 2020 as a result of the unlocking process. About 57 per cent of the survey respondents opined that the economy is going to grow and improve in the next six months. The funding outlook also improved compared to the previous quarter. 38 per cent of respondents opined that the scenario would be better in the coming six months, while 31 per cent felt that the current levels of credit availability would continue for the next six months.

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