Real estate sentiment upbeat post the second wave of pandemic
Given the resilience we’ve seen in this sector, particularly in recent quarters, sentiment looks optimistic going forward.
The second wave of the pandemic has changed the future sentiment of property investors in the country. Thanks to a significant decrease in Covid cases since May 2021, there has been an increase in new starts and we are seeing good sales. At the macroeconomic level, the recovery rate shows a clear recovery. The stakeholder outlook for macroeconomic dynamics and credit availability is positive due to changes in macroeconomic events.
Given the resilience we’ve seen in this sector, particularly in recent quarters, sentiment looks optimistic going forward. 2020 was the year that changed everything; and 2021 has brought greater resilience, digital riots and inventions that will make change “better”. While we may not be able to overcome the barriers of a pandemic-hit economy as a whole in 2021, the foundation for a sector-wide recovery is already in place.
Despite interruptions, office space absorption has improved compared to the previous year. Rental activity in the Delhi-NCR area has increased particularly since June 2021. With strong employment growth and the likelihood of future REIT listings, investors are looking for high quality office properties that are in high demand. To maintain income stability, investors look for assets with higher and constant returns. Meanwhile, the persistent weakness in the investment potential of the residential real estate market and the associated risks of the reinvestment cycle are encouraging more commercial real estate investments.
With office properties in Grade A buildings and even logistics facilities, investors achieve the stable and reliable returns they want. As more and more people work from home, the product metrics continue to evolve. While office real estate is expected to continue to attract the most investment, defensive assets like logistics and data centers are expected to gain in importance. As the economy improves, investment in retail and hospitality will also gain momentum.
Without a doubt, the second wave slowed the recovery process. Demand fell significantly in the second quarter of 2021 compared to the same period in 2020, which was marked by a full nationwide lockdown following the first round of the COVID-19 outbreak. Although after a year the sector was technically better prepared to deal with the virus, the intensity of the second wave undermined consumer confidence and slowed the recovery.
Unlike last year, however, this time around there is a silver lining in the availability of long-awaited vaccines. While demand slowed in April and May 2021, it picked up in June 2021, suggesting a faster comeback in subsequent quarters. Compared to the second quarter of 2020, when comparable blocking conditions existed, sales in Delhi NCR increased 1.5-fold; Sales in June 2021 accounted for around half of all sales in the second quarter of 2021. In the second quarter of 2021, the NCR Delhi contributed around 20% to total national sales, in second place after Mumbai with a little more than 20%. As the vaccination campaign continues to strengthen the country and the central bank maintains its supportive position and rates interest rates at all-time lows, demand for residential property should pick up strongly in the quarters ahead.
(By Navdeep JP Sardana, Founder, Elite Landbase Pvt Ltd)
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