Real Estate Sentiment At A Year-High In Q4 2020

According to the 27th Edition of Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index Q4 2020 (October – December 2020) Survey, for the first time in 2020 the 'Current Sentiment Score' entered the optimistic zone at 54 points in Q4 2020, a significant jump of 14 poi

BY Realty Plus
Published - Thursday, 28 Jan, 2021

Real Estate Sentiment At A Year-High In Q4 2020

According to the 27th Edition of Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index Q4 2020 (October – December 2020) Survey, for the first time in 2020 the 'Current Sentiment Score' entered the optimistic zone at 54 points in Q4 2020, a significant jump of 14 points over the previous quarter. The 'Future Sentiment Score’ also witnessed a robust surge to 65 points in Q4 2020 from 52 points in Q3 2020. Geographically, the western part of the country saw the sharpest jump in Future Sentiment Index. This zone’s Future Sentiment jumped to 66 points in Q4 2020 from 47 points in Q3 2020. With respect to stakeholders, both developers and non-developers (which include banks, NBFCs and PE funds) recorded an improvement in Future Sentiment score in Q4 2020. On the macroeconomic front, 82% of the survey respondents opined that the economy would grow further in the coming six months as opposed to the 57% respondents with the same view in Q3 2020.Similarly, the share of survey respondents with the opinion that economic health will worsen in the next six months went down substantially to 7% in Q4 2020 from 31% in Q3 2020. In terms of credit availability, 87% of the Q4 2020 survey respondents believed that the funding scenario would either improve or continue to remain the same over the next six months. Further, 77% of the Q4 2020 survey respondents were of the opinion that residential sales would increase over the next six months, up from 66% in Q3 2020. With regards to the office market, 60% of the Q4 2020 survey respondents, up from 47% in Q3 2020, believed that office leasing activity would increase over the next six months. The October-December 2020 quarter continued to see an improvement in the business momentum. Office space leasing grew as global players began acting on their pending and anticipated lease plans encouraged by the news of multiple potential COVID vaccines. Traction in residential segment continued in Q4 2020 on the back of festive discounts, pent-up demand and low home loan interest rates. Stirring demand and festivities of Q4 2020 gave a strong fillip not just to the real estate sector but also to the economy at large. The improvement in high-frequency indicators recorded since September 2020 continued in December 2020 as well. Goods and Services Tax (GST) collections in December 2020 are at a record high whereas the Purchasing Managers’ Index (PMI) for manufacturing recorded a fifth straight month of expansion. This economic growth environment has raised the market’s expectations of recovery in the coming six months and is reflected in the climbing Future Sentiment score. Zonal Future Sentiment Score The West Zone has seen the highest jump in the Future Sentiment score, climbing to 66 in Q4 2020 from 47 in Q3 2020. East zone stakeholder outlook also saw a substantial leap in future sentiments, jumping to 65 in Q4 2020 from 50 in Q3 2020. The Future Sentiment score for the North region went up to 58 in Q4 2020 from 55 in Q3 2020 while that of the already bullish South region improved marginally to 66 in Q4 2020 from 65 in Q3 2020. In Q4 2020, the Future Sentiment index for all regions is higher than Q4 2019 (pre-COVID level). This reflects the strong optimism prevailing in the sector as we enter 2021. Stakeholder Future Sentiment Score

The outlook of supply side stakeholders has moved into the optimistic zone in Q4 2020 for both developers and non-developers (non-developers include banks, financial institutions and PE funds).
Developer sentiments picked up on the back of resolving supply-side challenges and growing demand. The Q4 2020 performance of residential market across top eight cities in India was encouraging, as sales velocity returned to pre-COVID levels. Office transactions also grew in the last quarter of 2020 with occupiers beginning to execute their pending and future lease plans. This jump in demand has strengthened the developer outlook of real estate market for the coming six months.
Fueled by the increase in residential sales and the pick-up in office transactions, real estate lending of banks and financial institutions also received a fillip. Accordingly, the future outlook of non-developers i.e. the financial stakeholders of real estate sector, improved in Q4 2020. Their Future Sentiment score jumped to 63 in Q4 2020 from 50 in Q3 2020, moving into the optimistic zone for the first time since Q4 2019.

With news of multiple potential vaccines doing the rounds, office space transactions gathered momentum towards the end of 2020. Global companies began locking in their anticipated office space requirements in preparation of full-occupancy in near future, thus giving a boost to office market traction. Residential segment outlook was supported by pent-up demand, festive demand, multi-decadal low home loan interest rates, attractive residential prices and state government incentives such as reducing the stamp duty in Maharashtra. Residential sales reached pre-COVID levels (2019 quarterly average) by Q4 2020.