Sentiment on real estate market strong: Knight Frank-NAREDCO report

Mumbai Overall optimism in the domestic real estate market remains strong despite geopolitical risks and rising domestic interest rates, said a latest Knight Frank-NAREDCO report released on Tuesday.
While developer sentiment has improved about the future of the market, non-developers (banks etc.) are cautious about credit challenges to the real estate sector due to projections of deepening recession in developed countries.
According to Knight Frank-NAREDCO’s Q4 (Oct – Dec 2022) Real Estate Sector Optimism Index, the current sentiment on the state of Indian real estate softened in Q4 but (post Q3) over the next six months (March 2023) The index of optimism regarding the situation has increased.
According to the report, the current Optimism Index has declined from 61 in the third quarter of 2022 (July-September, 2022) to 59 in the fourth quarter (October-December, 2022). An index above 50 indicates optimism about growth. .
According to the report, the main reasons for this softening in the current optimism index are the bleak global economic outlook and geopolitical risks due to the long-running Russia-Ukraine war. However, the index of optimism about the future is improving with the Indian economy and real estate industry continuing to be strong. The futures optimism index, which reflects sentiment over the next six months, rose to 58 in Q4 of 2022 from 57 in Q3 of 2022.
Similarly, the index of developer optimism about the future for the next six months (up to March 2023), representing market expectations, increased from 53 in Q3 to 62 in Q4.
The sustained momentum in residential sales has boosted the developer community’s optimism for the next six months despite rising housing loan costlier due to the Reserve Bank’s policy repo rate hike to 2.25 per cent.
The report states that the underlying demand for the residential asset class is supporting the confidence of developer units. Along with this, the thinking of non-developer stakeholders like banks and financial institutions is largely positive about the next six months but they want that there is a need to be cautious about the market.
The future sentiment index for non-developers (this segment includes banks, financial institutions, PE funds) declined from 60 in Q3 to 55 in Q4.
They believe that the looming threat of recession and high interest rate regimes in the world’s major developed economies could affect the investment climate and make it challenging for Indian businesses to raise funds.