Real estate sentiment hit all-time low in April-June; stakeholders remain pessimistic for 6 months

The sentiments in the country's real estate sector hit an all-time low during April-June due to the Covid-19 pandemic and remain pessimistic for the next six months even as stakeholders see slight improvement, according to a survey.

According to 25th survey by property consultant Knight Frank and industry bodies Ficci and Naredco, the current sentiment index fell to 22 in April-June from 31 in the previous quarter.

"The current sentiment is recorded to be at the lowest," Knight Frank India said in a statement.

Track live updates on coronavirus here

The future sentiment index improved to 41 from 36 during the period under review but remained in the pessimistic zone.

"With continued economic stress and ambiguity regarding recovery, the current sentiments of the real estate stakeholders in India have been recorded at a low 22 in Q2 2020 (April-June)," Knight Frank India said.

This survey, covering the April-June 2020 period, was conducted in the first two weeks of July 2020.

The survey covers key supply-side stakeholders, which include developers, private equity funds, banks and non-banking financial companies (NBFCs).

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.

Knight Frank India Chairman and Managing Director Shishir Baijal said, "With some of the macroeconomic indicators showing marginal improvement and with the impending festive season in the second half of the year, the stakeholders have shown improved sentiments compared to the previous quarter, albeit they have remained in the pessimistic zone."

He added that at this juncture, the lockdown is expected to ease further by the advent of the festive season, helping to revive economic activity and propel conversion of the pent-up demand.

Baijal said the central bank and the government have announced stimulus measures that have provided a much-required reprieve to the economy in these testing times.

"However, there is a need for further demand-boosting measures to improve sentiments in the economy," he said.

For the real estate sector in particular, Baijal said there is a need for measures such as additional tax benefits for buying or renting a house, added incentives for affordable housing, easing of credit availability for the sector and a one-time restructuring of developer loans to help the sector recover from this crisis.

Sanjay Dutt, MD and CEO of Tata Realty & Infrastructure Ltd and chairman of the FICCI Real Estate Committee, said, "The sentiment for residential market is expected to remain low with a desire for 'unlocking of the lockdown' and therefore, better outlook for the next quarter."

The office market, on the other hand, has shown nearly 98-99 per cent rent collection and low relevant micromarket vacancies with some marginal rental growth abundantly demonstrating its sustainability, he said.

"The retail and the institutional investors are flocking to REITS (real estate investment trusts).

"You will see by the end of the year close to 100 million sq ft listed at the exchanges. We expect $2-3 billion investment to exchange hands by March 2021. Some vacancies at Tier 2 tenants and developments are expected," Dutt said.

Niranjan Hiranandani, national president of NAREDCO and Founder & MD of Hiranandani Group, said, "The economy was catering even before the pandemic hit, with demand stagnation leading to declining GDP growth over successive quarters."

The unprecedented Covid-19 pandemic and the consequent total economic lockdown had a big dent on sentiments and activity level in the second quarter of 2020, he said.

He suggested reduction in taxes, levies, stamp duties and GST for stipulated time-frame to generate demand shock which is imperative to kick-start the economic uptick.

"Simultaneously, in addition to the fiscal stimulus, industry pegs high hopes on one-time debt restructuring, additional stress fund and enhanced credit flow supply to facilitate working capital requirement of businesses to revive back," Hiranandani said.