Developers, financial institutions cautiously optimistic of growth in the real estate sector

While both current and future sentiment remain positive, the scores reflect a tempered view on growth, influenced by election and budget speculations

Real estate developers, investors and financial institutions are cautiously optimistic about growth in the sector in the next six months, according the 41st edition of the Knight Frank – NAREDCO Real Estate Sentiment Index Q2 2024 (April – June 2024) report.

Real estate developers, investors and financial institutions are cautiously optimistic about growth in the sector in the next six months. (Representational photo)(Unsplash)

It observed that the current sentiment index score has moderated to 65 from it's all-time high of 72 in Q1, 2024. The future sentiment score declined to 65 from 73.

The quarterly 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.

Scores reflect a tempered view of the real estate sector

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 report said.

The future outlook for the housing market remains in optimistic territory, while all stakeholders have adopted a cautious outlook for the next six 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.

As many as 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, the report said.

Developers, investors confident about office market growth

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. As many as 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, while In Q1 2024, 65% of the survey respondents held a similar view, it noted.

"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. .. 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," said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

“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,” said Hari Babu, President-NAREDCO.