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Sentiments improve for real estate with Q1 2022 Current and Future Sentiment Scores at new highs: Knight Frank-NAREDCO Real Estate Sentiment Index

Naredco

Mumbai, April 20, 2022: Sentiments in the real estate sector have remained optimistic and touched new highs on the Knight FrankNAREDCO Real Estate Sentiment Index Q1 2022. The flagship survey conducted quarterly by Knight Frank India and National Real Estate Development Council (NAREDCO) noted that Current Sentiment soared to a new high of 68 – indicating that most stake holders experienced positive developments in their businesses in the last 6 months including the period of the survey. Importantly, the Future Sentiment score recorded at 75 was at a historical best. This score indicates the expectations of the developers/investors for the next six months from the time of the survey.

The Current Sentiment score increased from 65 in Q4 2021 to 68 in Q1 2022 as the last six months remained positive for growth for most real estate stake holders. 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 Future Sentiment score, which gauges the stakeholders’ expectations for the next six months, also soared to 75 in Q1 2022 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.

When asked on their Economic Outlook for India, 85% of respondents in Q1 2022 expect the overall economic momentum to improve over the next six months. In terms of Credit Availability Outlook, 66% of the respondents expect the funding availability to increase over the next six months, while 29% expect it to remain the same during the period.

CURRENT AND FUTURE SENTIMENT SCORES Q1 2022

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 Q1 2020 Q2 2020Q3 2020Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021Q1 2022
Current Sentiment Score31 2240545735636568
Future Sentiment Score36 4152655756726075

Source: Knight Frank Research

Score >50: Optimism         Score =50: Neutral/Same          Score <50: Pessimism

shishir

Shishir Baijal, Chairman and Managing Director, Knight Frank India said, “The growth in the residential market has been impressive, elevating the sentiments of the entire sector. As most companies start calling their staff back to work, office space demand has also been growing steadily. The buoyancy in stakeholders’ take on the sector reflects positively in both the Current and Future Sentiment Scores. 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.”

                ZONAL FUTURE SENTIMENT SCORE

South Zone remains the most optimistic market with the highest score across zones in the current quarter. The Future Sentiment Score for South has inched up from 64 in Q4 2021 to 66 in Q1 2022. Compared to Q4 2021, the Future Sentiment score for the North Zone has inched up substantially with an increase from 57 in Q4 2021 to 65 in Q1 2022 as key markets in the North Zone recorded good traction in both office and residential sectors. The other zones – West and East – maintained their optimistic position with a score of 57 each. Despite a marginal fall in East, where the score altered from 58 in Q4 2021 to 57 in Q1 2022, both these regions remained in the optimistic territory.

ZONALQ1 2020Q2 2020Q3 2020Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021Q1 2022
North283855585655635765
South394265666357626466
East394050655348575857
West343847665360675657

Source: Knight Frank Research

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rajan

Rajan Bandelkar, President, 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. 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 chains 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.”

                OFFICE MARKET OUTLOOK – Q1 2022

With high vaccination coverage and improving business environment, the outlook towards the Indian office market has enhanced considerably in Q1 2022. As COVID-19 restrictions have been scaled back nationally in March 2022, 72% 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% 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% of the survey respondents are of the opinion that new office supply will increase over the next six months.

Office LeasingNew Office SupplyOffice Rents
Increase72%67%55%
Same17%24%31%
Decrease11%9%14%

Source: Knight Frank Research

RESIDENTIAL MARKET OUTLOOK – Q1 2022

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. 80% of the survey respondents expect residential sales to increase in the next six months. This is a significant improvement over Q4 2021, when 72% of the respondents had a similar view. 78% of the survey respondents in the current quarter expect residential prices to increase in the next six months. During Q4 2021, only 34% of the survey respondents had a similar take. Stakeholders’ sentiments about residential launches also remained upbeat for the next six months. 80% of the stakeholders expect residential supply to increase in the next six months.

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             Residential LaunchesResidential SalesResidential Prices
Increase80%80%78%
Same6%13%18%
Decrease14%7%4%

Source: Knight Frank Research

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