In the Knight Frank- NAREDCO Real Estate Sentiment Index Q3 2023 report for July-September 2023, it’s mentioned that the Current Sentiment Score decreased from 63 in the previous quarter to 59 in Q3 2023. This drop is attributed to the sudden Middle East conflict and growing regional tensions among nations. Despite some concerns among Indian stakeholders about the global economic slowdown affecting Indian businesses, the overall sentiment remains optimistic with a score above 50.

The Future Sentiment Index inched up slightly from 64 to 65, driven by stakeholders’ optimism about the Indian economy’s ongoing growth, which is expected to boost the real estate sector’s performance in the next six months. This positive sentiment is fuelled by the anticipation of increased demand during the ongoing festive season. Additionally, the confidence of supply-side stakeholders (real estate developers) and financial institutions (banks, NBFCs, PE funds, etc.) in India’s real estate sector has been bolstered by easing consumer inflation and stable interest rates.

In the current quarter, the residential market outlook remains strong, with stakeholders expressing confidence in higher residential sales and pricing parameters in both segments. The office market’s outlook is optimistic across all major indicators, including leasing, supply, and rental rates, as stakeholders maintain confidence in the performance of this asset class over the next six months.

The quarterly Knight Frank-NAREDCO report gauges the current and future sentiments regarding the real estate sector, economic conditions, and funding availability from the perspective of supply-side stakeholders and financial institutions. A score of 50 signifies a neutral viewpoint or a status quo, a score above 50 indicates a positive sentiment, and a score below 50 signifies a negative sentiment.

With the highest score in 11 quarters, the Developer Future Sentiment score has inched up from 65 in Q2 2023 to 66 in Q3 2023. This increase is attributed to a pause in interest rate hikes for the fourth time, coupled with the impact of RRI and the festive enthusiasm. A halt in the RBI’s interest rate hikes for the fourth consecutive time and the increased demand for residential properties during the festive season are the primary factors shaping the optimistic outlook of real estate developers for the upcoming six months.

In the non-developer category, which includes banks, financial institutions, and Private Equity funds, the Future Sentiment score achieved its highest score in six quarters, rising from 62 in Q2 2023 to 64 in Q3 2023. Institutional investors, who were cautiously optimistic in previous periods, now demonstrate higher confidence in the Indian economy. The RBI’s decision to pause the interest rate hike cycle has had a positive impact on the sentiment of non-developers.

The Residential Market Outlook displays increased confidence, anticipating a surge in both residential sales and prices over the next six months. In Q3 2023, 60% of the survey participants anticipate a rise in residential sales, a noticeable increase from the 55% who held the same view in the previous quarter. Moreover, approximately 72% of the respondents expect residential prices to climb in the next six months, a higher percentage compared to the 64% who shared this sentiment in the prior quarter.

In Q3 2023, 63% of stakeholders expressed the belief that there will be an improvement in residential project launches in the next six months. This percentage is slightly higher than the 62% of stakeholders who shared a similar opinion in Q2 2023. The festive season has witnessed many developers introducing new projects, leading to stakeholder expectations regarding new project launches remaining consistent with the previous quarter.

The looming threat of a recession, combined with the repercussions of new geopolitical disruptions in developed markets, has led stakeholders to believe that India will maintain its status as an attractive destination for investment and operational expansion. This, in turn, is expected to boost office leasing, supply, and rental rates. In Q3 2023, 52% of survey participants anticipate an improvement in office leasing over the next six months, a figure consistent with the previous quarter.