Real estate Sentiment Continues To Be Positive

The 41^st edition of the Knight Frank – NAREDCO Real Estate Sentiment Index Q2 2024 (April – June 2024) report cited that the Current Sentiment Index Score has moderated to 65 from its all-time high in Q1 2024 indicating a measured outlook among stakeholders.

Future Sentiment score for this period also recorded a recalibration in Q2 2024 and was recorded at 65. While both current and future sentiments remain firmly in the positive zone suggesting a continued belief in the sector’s long-term prospects, the scores reflect a more tempered view on recent real estate growth, influenced by election and budget speculations.

The Future Sentiment Index has adjusted from 73 in Q1 2024 to 65 in Q2 2024, reflecting a positive yet more conservative outlook for the near term. This recalibration may be attributed to anticipatory caution around potential macroeconomic developments, including fiscal policies and geopolitical events, that could influence market confidence. Despite this decline, the sentiment remains in positive territory, showcasing the sector’s resilience with notable activity in residential and office markets.

The residential market outlook in Q2 2024 sustainsoptimism with 63% response rate for an expected rise in residential prices while 51% of the stakeholders anticipate an increase in sales with a significant portion of 24% respondents expect stability.

The office market outlook exhibits buoyancy on all key parameters – leasing, supply and rent as the stakeholders remained confident of the performance of this asset class in the next six months.

The quarterly Knight Frank-NAREDCO report captures the current and future sentiments towards the real estate sector, the economic climate and funding availability as perceived by the supply-side stakeholders and financial institutions. A score of 50 represents a neutral view or status quo; a score above 50 demonstrates a positive sentiment; and a score below 50 indicates a negative sentiment.

Current and Future Sentiment Scores

Sentiments of Developers and Non-Developers

The Developer Future Sentiment Score moderated from 72 in Q1 2024 to 61 in Q2 2024, indicating a more measured outlook. While remaining optimistic, developers have demonstrated caution, having experienced strong sales since the beginning of 2023. Even as markets initially seemed poised for sustained growth with significant tailwinds, the extended uptrend in the industry cycle has led to a more cautious stance.

The Non-Developer Future Sentiment Score (which includes banks, financial institutions, PE funds) adjusted from 73 to 68. This shift reflects stakeholders’ careful evaluation, considering the macroeconomic concerns that are weighing heavily.​
 

Source: Knight Frank Research

Note: Non–Developers include banks, financial institutions, and PE funds

Hari Babu, President-NAREDCO, said, “In Q2 2024, the Knight Frank NAREDCO Real Estate Sentiment Survey paints a picture of a resilient and optimistic Indian real estate sector. Although there has been a slight adjustment in sentiment, the overall outlook remains positive. This shift reflects a more cautious approach in light of recent political and budget-related uncertainties. Despite these adjustments, confidence in the sector’s future is strong.

“The residential and office markets continue to show notable activity, signalling ongoing growth and opportunity. Developers and other key stakeholders, including banks and financial institutions, are maintaining a positive outlook. This suggests that while there may be short-term challenges, the sector is well-positioned to adapt and thrive. The continued optimism and activity in the market highlight the sector’s ability to sustain its momentum and drive forward, even amidst changing conditions.”

Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “The current and future sentiment score of 65 is still in positive, however this recent dip shouldn’t raise concerns as it simply indicates a shift toward cautious optimism in the real estate sector.

“The economy remains positive with key indicators seeing stability while remaining resilient against the global geo-political developments. With positive sentiment driven by sustained growth in residential and office markets, this adjustment highlights the sector’s careful and measured approach, ensuring continued stability amidst ongoing economic and political developments.”

Residential market outlook

The future outlook for the residential market remains in the optimistic territory, while all stakeholders have adopted a cautious outlook for the next 6 months. Taking a speculative view of the real estate sector with impending budget during the period, the stakeholders remained watchful as we observed the same during the previous election period of 2019.

In this quarter’s survey, 51% of the respondents expect residential sales to increase in the next six months as compared to 73% in the last quarter. In Q2 2024, 61% of survey respondents were of the opinion that residential launches will improve in the next six months.

63% of the survey respondents in Q2 2024 expect residential prices to increase in the next six months. However, during Q1 2024, 82% of survey respondents held a similar view.  

Moderated yet optimistic outlook for residential market

Office market outlook

The office outlook exhibited buoyancy on leasing and supply parameters as survey respondents remained confident about this sector in the next six months. Stakeholders opined that demand in India’s office market will bolster in the next six months and give a fillip to new supply as well.

In Q2 2024, 63% of survey respondents expect office leasing to improve in the next six months, driven by positive business sentiments and economic recovery. 47% of respondents predict an increase in office supply, indicating confidence in continued sector growth.

In Q2 2024, 65% of the survey respondents expect office rents to increase, whileIn Q1 2024, 65% of the survey respondents held a similar view.

Steady but Optimistic outlook for Office market

Economic Scenario

Based on the findings of the survey 59% of respondents expect an improvement in the economic scenario, reflecting optimism about India’s economic resilience and potential growth.

51% anticipate an increase in funding availability, demonstrating confidence in the financial sector’s continued support for real estate investments.  Stakeholder confidence remains strong and optimistic, with investment levels in H1 2024 nearly matching those of the whole of CY 2023 and expected to rise to the higher 2022 levels.