Home sales at pre-Covid level; overall sentiment optimistic: Knight Frank

The residential segment outlook, according to the survey findings, was supported by pent-up demand, multi-decadal low home loan interest rates, and attractive residential prices

Sales of residential units across eight major Indian metros – Kolkata, Chennai, Pune, National Capital Region (NCR), Mumbai, Bengaluru, Hyderabad and Ahmadabad – reached pre-Covid levels at 61,593 units in the December 2020 quarter (Q4’CY20) and the sentiment is likely to improve further, according to Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index for the October – December 2020 period. On average, these cities recorded total sales of 61,467 units in 2019, data show.

The residential segment outlook, according to the survey findings, was supported by pent-up demand, multi-decadal low home loan interest rates, attractive residential prices and state government incentives such as reduction of stamp duty in Maharashtra.

"The residential market outlook has revived further in Q4CY20, across all parameters, reflecting the increased traction in this segment. The impact of renewed consumer demand for residential realty has resulted in high levels of registration data, these transactions have lifted market sentiment" said Dr. Niranjan Hiranandani, national president - NAREDCO and ASSOCHAM and Founder & MD, Hiranandani Group.

Going ahead, 77 per cent of the survey respondents in the December 2020 quarter believe residential sales would rise over the next six months, up from 66 per cent in the September 2020 quarter and 31 per cent in the June 2020 quarter. However, only 38 per cent of the respondents believe that the prices of residential units will improve going ahead, down marginally from 40 per cent in September 2020 quarter.

“With regards to the office market, 60 per cent of the Q4 2020 survey respondents, up from 47 per cent in Q3 2020, believed that office leasing activity would increase over the next six months,” survey findings suggest.

Sentiment improves

The Current Sentiment score – a gauge used by the realty consultant to assess the current mood among relevant stakeholders – has jumped considerably to 54 in the October – December 2020 quarter (Q4'CY20) from 40 in July - September 2020 period (Q3'CY20) and 22 in April – June 2020 (Q2'CY20), entering the optimistic zone for the first time in 2020. The Future Sentiment score, too, showed an improvement – rising to 65 in (Q4'CY20) from 52 in (Q3'CY20), mirroring the strong recovery expectations prevalent in the market.

“Both the Current and Future Sentiment scores in Q4'CY20 have seen surge backed by revival in both residential and office market. As we begin our journey into 2021 with a positive outlook, it is important to closely watch the performance of key economic indicators in the coming months to check the sustainability of the growth. Equally crucial is the development of the vaccine and its widespread availability for the masses. These two factors will largely determine the performance of the real estate sector in the coming months,” said Shishir Baijal, chairman and managing director at Knight Frank India.

The Real Estate Sentiment Index, according to the Knight Frank - NAREDCO report, is based on a quarterly survey of 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.

West India leads optimism

Among regions, West Zone (West India) saw the highest jump in the Future Sentiment score, according to the Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index, reaching 66 in the December 2020 quarter from 47 in the September 2020 quarter.

“East zone stakeholder outlook also saw a substantial leap in future sentiments, jumping to 65 in Q4’CY20 from 50 in Q3’CY20. The Future Sentiment score for the North region rose to 58 in Q4’CY20 from 55 in Q3’CY20, while that of the already bullish South region improved marginally to 66 in Q4’CY20 from 65 in Q3’CY20,” the survey findings suggest.