Real estate sector confident of sustained demand: Survey

April 21, 2022
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Optimism in the real estate sector has touched new highs on the Knight Frank–NAREDCO Real Estate Sentiment Index Q1 2022. 

As per the survey, now in its 32nd edition, and conducted quarterly by Knight Frank India and National Real Estate Development Council (NAREDCO), the ‘current sentiment’ score soared to a new high of 68, up from 65 in Q4 2021. This indicates that most stakeholders experienced positive developments in their business in the last six months, including the period of the survey, the report said. 

“As the Indian economy navigated the third wave whilst being faced by uncertainty of a war in Europe, the real estate sector momentum remained unabated, especially of the residential segment. Commercial real estate segments also showed growth after the hiatus of the pandemic. While the sentiments have been positive for the two previous quarters, this score is one of the best reached in the history of the survey,” the report said.

Further, the ‘future sentiment’ score recorded at 75 was a historical best, it said. 

“This score indicates the expectations of the developers/investors for the next six months from the time of the survey,” the report said, adding this was “in view of a resolute economic outlook and continued demand for real estate space across asset classes.”

“With the removal of all Covid-19 protocols by the Indian government, there is a further boost in sentiments,” it said.

In terms of their economic outlook for India in Q1 2022, 85 per cent of the respondents expect the overall economic momentum to improve over the next six months. In terms of the credit availability outlook, 66 per cent of the respondents expect funding availability to increase over the next six months, while 29 per cent expect it to remain unchanged.

“However, geo-political tensions impacting crude oil prices are leading to a rise in inflation in Indian market, which can impact demand from end-users. The scenario is further complicated with supply chain disruptions, rise in input cost and an impending interest rate hike, all of which need to be watched carefully in the near future,” Shishir Baijal, Chairman-Managing Director at Knight Frank India Pvt Ltd, said.

South zone is most optimistic

South zone remained the most optimistic market with the highest score across zones in the current quarter. As per the report, the ‘future sentiment’ score for the South increased from 64 in Q4 2021 to 66 in Q1 2022; for the North zone it increased substantially from 57 to 65. Key markets in the North zone have recorded good traction in both office and residential sectors. 

The West and East zones maintained their optimistic position with a score of 57 each. This despite a marginal fall in East, from 58 to 57.

Rajan Bandelkar, President of NAREDCO India and Director of Raunak Group, said, “Amidst the geopolitical tensions and a slow economy witnessed over the past few months, the real estate sector in India remained impacted during the first quarter of the year. A result of the global uncertainties — a rise in the cost of raw materials such as steel, cement etc — is a concern for the sector. However, these concerns will likely get mitigated in the next few quarters.”

As per Bandelkar, “The gradual rise in sales across regions and the opening of offices all over the country, along with current occupier interest in office leasing, will contribute significantly to the expected strong recovery, and boost consumer sentiments. As seen in the current survey, the sentiment score has increased during the first three months. However, the situation with respect to the supply chain of raw materials may prolong in the near term.”

“Hence, the development strategy should focus on establishing uninterrupted supply chains and faster project deliveries. Such a strategy will help the sector in achieving growth. There is already a positive outlook for Indian real estate in the next six months as the country’s evolving urban landscape will continue to fuel the housing and office space demand,”  Bandelkar added.

Office leasing to maintain healthy growth

The outlook for the Indian office market has enhanced considerably in Q1 2022 owing to high vaccination coverage and improving business environment. With Covid-19-induced restrictions being scaled back nationally in March 2022, 72 per cent of respondents felt that office leasing will maintain a healthy growth curve in the next six months. 

In Q1 2022, stakeholder’s outlook for office rents also improved as compared to Q4 2021. In this quarter, 55 per cent of respondents opined that office rentals should increase in the next six months, backed by strong demand trends. In terms of new office supply, 67 per cent of the survey respondents opined that new office supply will increase over the next six months.

Residential market

“The Q1 2022’s survey findings present a very optimistic stakeholder outlook for the residential market in the next six months on the back of strong homebuying demand,” the report said.

Nearly 80 per cent of the survey respondents expect residential sales to increase in the next six months — a significant improvement over Q4 2021, when 72 per cent of the respondents had a similar view. About 78 per cent of the respondents expect residential prices to increase in the next six months. During Q4 2021, only 34 per cent had a similar opinion. Stakeholders’ sentiments on residential launches also remained upbeat for the next six months — 80 per cent expect residential supply to increase in the next six months.

The Real Estate Sentiment Index is based on a quarterly survey of key supply-side stakeholders, which includes developers and non-developers such as financial institutions including banks, non-banking financial companies (NBFCs) and private equity (PE) funds. This survey edition was for the period January-March 2022 and was conducted from March 22 to April 7.

Published on


April 20, 2022

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