Sentiments in realty sector dip in June qtr but remain positive; future outlook optimistic

The sentiment index for the real estate sector dropped in April-June period due to increase in interest rate on home loans but remained positive, according to Knight Frank India and NAREDCO.The outlook for next six months is optimistic although not as buoyant as it was during the March quarter.As per the Knight Frank-NAREDCO Real Estate Sentiment Index Q2 April-June 2022, the current sentiment score has moderated to 62 from record 68 reported in January-March.The sentiment index is based on the survey of supply-side stakeholders like developers, investors and financial institutions.

The sentiment index for the real estate sector dropped in April-June period due to increase in interest rate on home loans but remained positive, according to Knight Frank India and NAREDCO.

The outlook for next six months is optimistic although not as buoyant as it was during the March quarter.

As per the Knight Frank-NAREDCO Real Estate Sentiment Index Q2 (April-June 2022), the current sentiment score has moderated to 62 from record 68 reported in January-March.

The sentiment index is based on the survey of supply-side stakeholders like developers, investors and financial institutions. The score of above 50 indicates 'optimism' in sentiments, a score of 50 means the sentiment is 'same' or 'neutral'. The score below 50 indicates 'pessimism'.

The current sentiment index score has dropped mainly due to the perceived impact of the two consecutive repo rate hikes in May and June 2022 by the RBI.

The future sentiment score, which captures the stakeholder sentiments for the next six months for the real estate sector, also shrunk to 62 in Q2 2022 from its historic high of 75 in Q1 2022, as pressures of a rise in inflation and depreciating rupee against the dollar cast a shadow on the sector, the consultant said.

''Despite the decline, both the current and future sentiment scores remained optimistic,'' it added.

In Q2 2022, the Current Sentiment Index score and Future Sentiment Score are equal as stakeholders are confounded in the current economic climate where the impact of global economic headwinds on the Indian economy is yet to play out.

''The real estate supply-side stakeholders remain watchful of the tripartite global risks - economic turmoil in the United States, Russia - Ukraine standoff, and economic slowdown in Europe,'' Knight Frank said.

Interestingly, the study revealed while the developers' future sentiment score increased during the quarter, non-developers' score declined.

Knight Frank India CMD Shishir Baijal said: ''Over the last 8-10 quarters, it has been firmly established that there is a strong latent demand in the residential sector which, when supported by right prices and sops, will convert to sales. In the last few quarters, this has given the once beleaguered sector a strong come back.'' The housing demand remains strong despite some headwinds, leading to a positive outlook for the sector, he added. ''The key aspect to note is the growth in the commercial office sector, which was significantly impacted by the pandemic. However, it has made a strong come back in the last 3-4 quarters supported by strong economic growth, increased hiring, and a return to office trend, keeping the office sector buoyant,'' Baijal said.

While the overall economic scenario and world order are of caution, Naredco President Rajan Bandelkar said the strong fundamentals of the Indian economy and the real estate sector continue to give strength to various stakeholders, including developers, development authorities, policymakers, and end-consumers. On the Knight Frank report, Gurugram-based developer AIPL's Group Executive Director Pankaj Pal said the increase in home loan interest has hit sentiments slightly.

''Still, we believe that there is enough demand for quality development by reputed developers. Considering the pent-up demand and with the festive season around the corner, we believe that festive euphoria will eliminate all the negative sentiments, if any,'' Pal said.