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New Delhi: The current sentiment score for the real estate sector has moderated from 61 in Q3 2022 to 59 in Q4 2022, mainly because of bleak global economic scenario and geopolitical risks from the Russia-Ukraine war, according to the 35th edition of the Knight Frank-NAREDCO Real Estate Sentiment Index Q4 2022 (October - December 2022).

However, the continued resilience of the Indian economy and of the real estate industry has influenced an upward movement in the Future Sentiment Score. The Future Sentiment Score has increased from 57 in Q3 2022 to 58 in Q4 2022.

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. 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.

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

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, he said.

Based on the sales rally witnessed in 2022, stakeholders expect the current residential demand momentum to sustain in the next six months. In Q4, 74% of the survey respondents expect residential sales to increase or remain stable in the next six months. In comparison, 71% of the respondents held a similar view in Q3.

Stakeholder sentiments about residential launches have improved in Q4 . In Q4 2022, 50% of the stakeholders expect residential supply to increase in the next six months while in Q3 2022, 46% shared a similar view.

In Q4 2022, 47% of the survey respondents expect residential prices to increase in the next six months. In comparison, during Q3 2022, 41% of the survey respondents had a similar view.

In Q4 2022, 39% of the survey respondents opined office leasing will increase in the next six months. In contrast, 44% held a similar view in Q3 2022. This is largely due to the perceived impact of recession in global economies which can delay decision-making for office leasing in India in the near term.

In Q4 2022, 50% of survey respondents expect office supply to improve in the next six months. In the previous quarter, 48% respondents had a similar opinion. In Q4 2022, 30% of the survey respondents expect office rents to increase, whereas, in Q3 2022, 53% of the survey respondents held the same opinion.

In Q4 2022, 30% of the survey respondents expect office rents to increase, whereas, in Q3 2022, 53% of the survey respondents held the same opinion.

“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,“ Rajan Bandelkar, President, NAREDCO and Director of Raunak Group said.

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