Real Estate Sentiment Index at all-time low amid COVID-19 pandemic

The unprecedented condition has impacted global markets and societies

Budget 2019: Home buyers body want Rs 10,000-cr 'stress fund' to complete stalled projects Representative image

Not surprisingly, the latest forecast of India’s ‘Real Estate Sentiment Index’ is at an all-time low at 31. This is the lowest ever recorded.

The ramifications? The affordable and medium-level housing projects will take a hit, with property prices as well as rentals set to crash. Office segment, the only area of realty that was faring well during the economic slowdown of the past year or so, is also set to get lacklustre, with companies getting cost-conscious and work-from-home (WFH) changing dynamics of office space requirement. Co-working and co-living will also take a tumble.

How bad the Index at 31 is can be surmised from one simple statistic - even during the disastrous post-demonetisation days of end-2016, the lowest the Index had fallen was 41. And right now, things are simply not looking up. The outlook for the next six months fares almost equally bad, at 36.

The Sentiment Index, calculated every quarter by Knight Frank and FICCI, is an industry-accepted mode of gauging the perceptions and expectations of the real estate industry’s stakeholders on a composite scorecard of 100. Anything above 50 is considered optimistic, while below that half-way mark means the belief is that the situation will get worse.

After being down (below 50) for two quarters in 2019 due to the economic slowdown that had gripped the nation, the Index was showing signs of optimism last time around, going up to 53 (with outlook for the future at 59).

“The pandemic has created an unprecedented condition which is impacting global markets and societies,” pointed out Shishir Baijal, chairman and managing director of Knight Frank India, who feels the stimulus package from the government has not been enough. “Further support may be required to help the real estate sector and for the economy to stay afloat during the crisis. The real estate segment specifically will have a longer journey to make.”

While 76 per cent of the stakeholders believe the economy is on a downward spiral, almost 70 per cent think that flow of funds to the real estate sector might get worse or remain at the current levels in the coming six months.

While WFH is another bad news for the real estate sector, many feel this lockdown necessity will translate into a shift in office space dynamics. And not all of it need be bad, either. Co-working spaces, while they may lose their new economy startups, may have takers in corporates looking to cut costs.