Commercial office assets remained the frontrunner during Q2 2021, garnering about 40 percent share of the investment pie.
The second wave of the pandemic has had its impact on real estate market sentiment. The real estate sentiment index score has dropped from 57 in Q1 2021 to 35 in Q2 2021, but the drop is less intense than it was during the first COVID-19 wave (Q2 2020) when the score had hit an all-time low of 22, as per the 29th Edition of Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index Q2 2021 (April - June 2021) Survey.
Stakeholder outlook on office market saw an improvement in Q2 2021 especially with respect to leasing activity. More than 50% of the Q2 2021 survey respondents continue to expect an increase in residential launches and sales in the coming six months, it said.
The future sentiments of real estate sector stakeholders remained optimistic in Q2 2021 despite the second COVID wave that struck during this period. Further, the stakeholders’ reaction to the second pandemic wave was not as severe as it was during the first wave as indicated by the relatively lesser drop in sentiment scores in Q2 2021, the Survey said.
The Future Sentiment score has inched down marginally from 57 in Q1 2021 to 56 in Q2 2021 continuing to remain in the optimistic zone. Here as well, the outlook of stakeholders reflects more resilience in Q2 2021 than in Q2 2020.
In terms of geography, the West zone saw the sharpest recovery in the Future Sentiment Score. This zone’s Future Sentiment score jumped from 53 in Q1 2021 to 60 in Q2 2021. With the resumption of economic activity, future sentiments (for the next six months) of stakeholders have remained in the optimistic zone, across most regions, it said.
The Real Estate Sentiment Index is based on a quarterly survey of key supply side stakeholders which include developers and non-developers, i.e. financial institutions including banks, Non-Banking Financial Companies (NBFCs) and private equity (PE) funds. The survey comprises questions pertaining to the overall economic momentum, funding availability, project launches, sales volume, leasing volume, prices and rents.
The Index is determined by calculating the weighted average score of the number of responses across questions. A score of 50 represents a neutral view or status quo; a score above 50 demonstrates a positive sentiment; and a score below 50 indicates a negative sentiment.
Office leasing may increase in the next six months; rents to remain stable
Stakeholder outlook on office market saw an improvement in Q2 2021 especially with respect to leasing activity. In Q2 2021, 40% of survey respondents were of the opinion that office leasing activity would increase over the next six months, up from 34% last quarter. Around 21% of the Q2 2021 survey respondents, up from 15% in Q1 2021, expects office rents to increase in the next six months while 40% expect rents to remain stable.
The optimism in residential market outlook has also continued in Q2 2021. More than 50% of the Q2 2021 survey respondents continue to expect an increase in residential launches and sales in the coming six months, it said.
On the macroeconomic front, more than 80% of the Q2 2021 survey respondents continue to have an optimistic outlook for the economy in the coming six months. While on the credit availability front, stakeholder outlook has improved in Q2 2021 with 46% respondents – up from 41% in Q1 2021 – expecting an increase in the coming six months.
“The tragedy of the second wave of pandemic has pushed the overall industry sentiments down in the second quarter of 2021. However, our learning from the first wave, as well as a less stringent lockdown in the second wave, have equipped us well to mitigate the severity of the economic ramification, showing some level of positive outlook among the stakeholders when compared to the dead low sentiment score of 22 during the same period last year,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.
“Despite the debilitating impact of a pandemic, the outlook of the sector is realty positive. This is reflected in a recent Knight Frank- FICCI-NAREDCO study, which reports the future sentiment score of 56 in Q2 2021 is an impressive rise from the Q2 2020 score of 41. There are several factors behind the growing positive sentiment. The nationwide vaccination drive has been a tremendous sentiment booster for the sector,” said Getamber Anand, co-Chair, FICCI Real Estate Committee and chairman and managing Director, ATS Infrastructure Ltd.
“The current Sentiment Index score in Q2 2021 reflects the impact of piecemeal restrictions in April and May followed by easing of curbs in June 2021. The calibrated reopening of economic activities with accelerated inoculation drive has resulted in an upward trajectory of home buying demand and sales in June on back of stability and security it offers during the deep crisis,” said Niranjan Hiranandani, National President, NAREDCO and MD, Hiranandani Group.