With the COVID-19 crisis playing havoc on the economy at national as well as global level, it is no wonder that the real estate sector is also feeling the heat. As per 24th Knight Frank – FICCI – NAREDCO Real Estate Sentiment Index Q1 2020, the current sentiment of the real estate stakeholders has dropped to an all-time low.
Not only the current sentiment, but the future also looks bleak. The ‘future sentiment score’ outlining the market expectations has also dipped well into the pessimistic zone at a score of 36.
As per the survey that includes more than 250 stakeholders, the score of over 50 signifies ‘Optimism’ in sentiments, a score of 50 means the sentiment is ‘Same’ or ‘Neutral’, while a score of below 50 shows ‘Pessimism’.
The current sentiment score in Q4 2019 was 59 as the real estate sector had started looking up in the Q4 2019 after being in the pessimistic zone (below 50 mark) for two consecutive quarters.
The Indian real estate, especially the residential segment, has not been doing very well since the past two years. First demonetization, then GST and later NBFC- induced crisis- the realty sector was struggling hard.
The slew of measures announced by the government to revive the sector in the last quarter of 2019 infused confidence in the real estate market. The measures include the creation of a stressed asset fund (AIF) of Rs 25,000 crore to provide last mile funding to stalled affordable housing projects.
However, the revival was certainly short lived as the COVID-19 outbreak marred the stakeholder’s sentiments like never before. The current sentiment of 31 is an all-time low level.
The pandemic has put an uncertainty over not only the current but also on the coming few months. The lockdown will translate into an interrelated sequence of stalled construction, delays in project deliveries, delays in loan repayments and debt servicing to banks. The overall slump in demand is expected to take over the realty segment owing to widespread uncertainties in employment and salary cuts.
Many stakeholders seem to have no hopes of revival happening anytime sooner in real estate. About 76 percent of the stakeholders feel that the overall economy is headed for a downward spiral. As many as 70 percent of the stakeholders believe that the flow of funds to the real estate sector might get worse or remain at the current levels in the coming six months.
“This crisis has retracted the end-user confidence to its lowest levels ever, which will push any kind of real estate purchase decisions to the distant future. The already ailing real estate sector has been crippled with this pandemic, making it imperative for government support to bring it back on track,” Money Control quoted Shishir Baijal, chairman and managing director of Knight Frank India, as saying.