The Current Sentiment Score has moderated from 61 in Q3 2022 to 59 in Q4 2022, mainly on account of a bleak global economic scenario and geopolitical risks due to the prolonged Russia-Ukraine war. However, the continued resilience of the Indian economy and of the real estate industry has influenced an upward movement in the Future Sentiment Score, according to the 35th edition of the Knight Frank-NAREDCO Real Estate Sentiment Index Q4 2022 (October – December 2022) report.
The Future Sentiment Score has increased from 57 in Q3 2022 to 58 in Q4 2022.
Developers remain very optimistic, Non-developers cautious
The Developer Future Sentiment Score – representing the market expectations for the upcoming six months (till March 2023), has scaled up from 53 in Q3 2022 to 62 in Q4 2022. Despite increasing mortgage rates owing to the 225-basis point hike in repo rates, the sustained momentum in residential sales has boosted developer sentiments for the next six months.
While the underlying demand for residential asset class lend confidence to the developers’ sentiment, non-developers express watchfulness for the next six months while remaining largely future positive. The Non-Developer (this segment includes banks, financial institutions, PE funds) Future Sentiment Score decreased from 60 in Q3 2022 to 55 in Q4 2022 while remaining in the optimistic zone. The looming threat of a recession and high-interest rate regime in major advanced economies can impact the investment climate and make fundraising for Indian businesses challenging.
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Commenting on the same, Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “The strength of domestic demand with relatively better inflationary position and nuanced monetary policy actions placed India as one of the leading performers in an uncertain global environment plagued by early recessionary trends. This reflects largely on the performance of the real estate market in the country as demonstrated by robust office and residential sales in 2022. While the global geopolitical and economic conditions is likely to remain volatile, the domestic economic conditions may see some stability as inflationary pressures are expected to ease by mid of the year. This should reflect well on demand and help the residential market remain largely buoyant.”
“However, globally, possibility of further rate hikes in key markets like the USA and UK may lead global investors to remain watchful. Having said that, the long-term outlook for India remains strong with a positive outlook for future real estate activities,” added Baijal.
Rajan Bandelkar, President, NAREDCO and Director of Raunak Group, said, “The Future Sentiment Score is really encouraging and reflects the optimism amongst the stakeholders given the strong post-Covid recovery in the economy and more so in the real estate sector. The strong fundamentals of the Indian economy along with the robust recovery in both demand and inventory supplies in the housing sector have set the momentum for the year ahead and this optimism is here to stay. Although global headwinds are there, India has navigated the scenario well so far, and it will be able to limit the impact of recessionary pressures going forward as well. So, even if the Current Sentiments have taken a hit, the Future Sentiments have witnessed a boost.”