Covid-19 impact: Sentiment in real estate sector worsened Jan-Mar, says survey

  • Sentiment score dropped to 31 in Q1 2020 after a brief revival in the October-December quarter of 2019
  • An index value of 50 is indicative of neutral sentiment and anything above that shows increasing optimism

Ashwini Kumar Sharma
Updated16 Apr 2020, 02:38 PM IST
The real estate sector has been hit hard by the covid-19 pandemic and the consequent lockdown.
The real estate sector has been hit hard by the covid-19 pandemic and the consequent lockdown.

The covid-19 pandemic and the consequent disruption to businesses has been brutal for the real estate sector which has been going through a rough patch the last few years. The sector is now staring at a bleak near term, with sentiment at an all-time low.

Sentiment of the sectoral stakeholders nosedived in the first quarter of 2020, revealed a survey conducted by Knight Frank India, Federation of Indian Chambers of Commerce & Industry (FICCCI), and National Real Estate Development Council (NAREDCO).

According to the result of the survey, the sentiment score dropped to 31 in Q1 2020 after a brief revival in the October-December quarter of 2019. Prior to that, the score had remained below 50 for two consecutive quarters.

An index value of 50 is indicative of neutral sentiment and anything above that shows increasing optimism. The index is based on a quarterly survey of supply-side stakeholders across India including developers, private equity funds, banks and non-banking financial companies.

The score for future sentiment--at 36--was also at its lowest in Q1 2020 because of the covid-19 outbreak.

According to survey, there is a perception that the lockdown will translate into a vicious cycle of stalled construction, delay in project deliveries, delay in loan repayments by buyers, delay in debt servicing to banks and an overall slump in demand due to the unease over job losses and salary cuts, which have marred the prospects of stakeholders.

The survey result also suggested stakeholders have a grim view about the economic scenario for the next six months, with 69% believing that the economy is headed for a downward spiral. The main area of concern is funding and liquidity situation in the sector. About 80% of stakeholders believe that the flow of funds to the sector may worsen or remain at current levels in the coming six months. On the other hand, more that 60% opined that the current crisis will hit new launches, sales and prices in the residential segment going ahead.

Property prices are seen falling because of weak demand, with the low and mid- priced segment worst hit given the pay cuts and job losses. Buying decisions may be deferred due to sharp wealth erosion and poor consumer sentiment, the survey indicated.

It also highlighted several measures such as one time re-financing of developers loan, relaxation in bad-debt classification, stress fund, relaxation in GST and stamp duty rates, among others, that government should take to help the revive the sector.

For customers, it is a good decision to wait awhile before buying the next property once the lockdown is lifted. Also, it will be prudent to be diligent before final call, and avoiding under-construction projects as completed projects may offer better deals.

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First Published:16 Apr 2020, 02:38 PM IST
HomeNewsIndiaCovid-19 impact: Sentiment in real estate sector worsened Jan-Mar, says survey

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