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Second covid wave dampens future real estate sentiment index

With the second wave of covid cases. future sentiments have weakened, as industry stakeholders grapple with pandemic related uncertainties. (Photo: Mint)Premium
With the second wave of covid cases. future sentiments have weakened, as industry stakeholders grapple with pandemic related uncertainties. (Photo: Mint)

  • Office market outlook remains uncertain and weak for the next six months particularly because of the uncertainty, but rentals are expected to remain steady. Around 65% of the respondents felt that residential project launches will rise in the coming months

BENGALURU: Concerns over the second wave of coronavirus infections in India and associated uncertainties have adversely influenced the future sentiment of stakeholders of real estate sector, according to Knight Frank-FICCI-Naredco Real Estate Sentiment Index Q1 2021.

The ‘Future Sentiment score’ dropped to 57 during January-March from 65 in the October-December quarter 2020, reflecting the cautious stance on the future of the real estate sector.

With a sharp increase in covid cases since March 2021, the outlook for residential launches and sales has softened. However, the share of respondents that expect the residential market to grow or remain steady in the next six months is over 80%, across parameters of launches, sales and prices.

The second wave and the mobility restrictions and possible lockdowns in some cities have also hit office occupancy levels. This has resulted in weakening of the office market outlook for the next six months.

“The sentiment of stakeholders remained cautious for both current and future sentiment scores in Q1 2021 (March quarter), owing 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," said Shishir Baijal, chairman and managing director, Knight Frank India.

The ‘Current Sentiment score’, for the past six months, has, however, inched up marginally to 57 in the January-March period from 54 in the December quarter. The current sentiment was mainly supported by a recovery in commercial office and residential segments before March. However, the severe spread of the second wave of infections marred sentiment of the real estate industry in March.

The office market outlook remains uncertain and weak for the next six months particularly because of the uncertainty, but rentals are expected to remain steady.

Around 65% of the respondents felt that residential project launches would go up in the coming months and sales activity would also see an increase.

“Since Q4 2020, the real estate sector had started seeing a meaningful recovery. However, with the second wave of covid raging in India, the future sentiments have weakened, as the industry stakeholders grapple with the pandemic related uncertainties. With industry players turning cautious, the six-month outlook for real estate has weakened across the parameters of demand, supply and pricing in Q1 2021, even while the sentiment scores continue to remain in the optimistic zone," said Rajani Sinha, chief economist and national director research, Knight Frank.

Apart from the pace of vaccination, government decisions on lockdown restrictions will largely determine the performance of real estate sector in the coming months, Sinha added.

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