In Q32023, The Real Estate Future Sentiment Index Rises: Report
Real Estate Future Sentiment Index Rises- The Developer Future Sentiment score has crept up to 66 in Q3 2023, its highest in 11 quarters. On November 3, 2023, the 38th edition of the NAREDCO Real Estate Sentiment Index Q3 2023 (July-September 2023) report was mentioned as the reason for the Current Sentiment Score’s decline from the previous quarter’s 63 to 59.
The sentiment is currently weaker due to the unexpected start of the Middle East conflict and the rise in regional tensions between countries. While Indian stakeholders have expressed concern about how the slowdown in the global economy may affect Indian firms, overall attitude is still positive.
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Due to stakeholders’ expectations of the Indian economy’s continuous growth trajectory, which will boost the real estate sector’s performance over the next six months with stronger demand anticipated over the upcoming Christmas season, the Future Sentiment Index saw a slight increase, rising from 64 to 65. In spite of mounting pressure from shifting global headwinds, supply-side stakeholders (real estate developers) & financial institutions (banks, NBFCs, PE funds, etc.) now have more faith in India’s real estate market thanks to declining consumer inflation and stable interest rates.
India’s real estate market
The current quarter’s home market prognosis shows that both residential sales & pricing parameters are strong, and stakeholders are still optimistic about future increases in both. The outlook for the office market is positive in terms of leasing, supply, and rent because the stakeholders are still optimistic about the asset class’s success over the next six months.
The perceptions of supply-side stakeholders & financial institutions regarding funding availability, the state of the economy, and attitudes towards the real estate industry both now and in the future. A score of fifty denotes the status quo or a neutral viewpoint; a score higher than fifty shows a positive feeling; and a score lower than fifty shows a negative sentiment.
Scores for Sentiment: Present and Future
| Score/Quarter | Q3 2021 | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 |
| Future Sentiment Score | 72 | 60 | 75 | 62 | 57 | 58 | 61 | 64 | 65 |
| Current Sentiment Score | 63 | 65 | 68 | 62 | 61 | 59 | 57 | 63 | 59 |
Developers’ & non-developer’s sentiments
The Developer Future Sentiment score, which was 65 in Q2 2023 and increased to 66 in Q3 2023, is the highest it has been in 11 quarters. The main factors affecting the upbeat view from real estate developers for the next six months are the RBI’s fourth interest rate hike pause and the festive spirit fueling residential demand.
The non-developer Future Sentiment score, which covers banks, financial institutions, and PE funds, increased from 62 in Q2 2023 to 64 in Q3 2023, marking the highest level in six quarters. Institutional investors have shown more confidence in the Indian economy than they did in previous periods when they were cautiously optimistic. The RBI’s decision to halt its cycle of interest rate hikes has improved the mood among non-developers.
Future sentiment scores for developers & non-developers are rising.
The recent geopolitical upheavals have caused a slight fall in the Current Sentiment Index Score, but the strong Future Sentiment Score indicates the persistent optimism regarding the prospects of the Indian real estate sector. It is encouraging to see that stakeholders in different zones have a positive outlook for the upcoming half-year, despite some obstacles. The real estate industry’s resilience is demonstrated by the notable rise in the Developer Future Sentiment score. However, non-developer organisations including banks, financial institutions, and private equity firms are growing increasingly optimistic about the industry’s ability to weather the storm.
The optimistic outlook for the residential market, fueled by the holiday spirit, a spike in sales, and pricing economics, highlights the industry’s fortitude in the face of uncertainty. The office market is anticipated to remain buoyant despite recent geopolitical upheavals and worries about a potential slowdown in economic growth. NAREDCO is dedicated to advancing stability and sustainability-promoting policies and assisting in the expansion of the real estate industry.
In addition to the ongoing Russia-Ukraine war, the Middle East turmoil has added a fresh geopolitical perturbation to the already difficult global climate. India’s internal economy is nevertheless resilient in the face of an unpredictable global economic climate caused by conflicts & high inflation in industrialized economies. The outlook for consumers and businesses across all industries, including real estate, has improved in India because to its strong economy and improving expectation for near-term inflation. A positive view for the real estate industry over the next six months is mostly due to the increased demand in the residential sector, which is being bolstered by stable borrowing rates, and the healthy occupier activity in India’s office market.
Strong residential sales & prices are reflected in the residential market outlook
The research states that the increased optimism in the home Market Outlook is due to the anticipated acceleration of home sales and prices over the next six months. Sixty percent of those surveyed in Q3 2023 anticipated a rise in residential sales during the following six months. By contrast, the previous quarter’s respondents held the same opinion, with 55% of them. Approximately 72% of survey participants anticipate an increase in residential prices over the next six months; 64% of survey participants had a similar opinion in the previous quarter.
According to 63% of the stakeholders in Q3 2023, residential launches will get better during the following six months. 62% of the stakeholders had the same opinion in Q2 2023. Stakeholder expectations for new project launches in the upcoming six months was mostly consistent with the previous quarter, despite the majority of developers introducing new launches during this Christmas season.
Residential market has a strong future
| Q3 2023 | The Residential Sales | Residential Launches | Residential Prices |
| Decrease | 17% | 11% | 6% |
| Increase | 60% | 63% | 72% |
| Same | 23% | 26% | 22% |
The office market’s outlook is positive in every way
Due to the combined effects of recent geopolitical upheavals in developed markets and the impending threat of recession, stakeholders believe that India will continue to be a desirable location for operational expansion and investment, which will support office leasing, supply, and rents. 52% of survey participants in Q3 2023 anticipate an improvement in office leasing during the following six months. Half of the survey participants from the prior quarter had a similar viewpoint.
49% of poll participants anticipate an improvement in office supplies during the next six months. Similar views were expressed by 47% of respondents in the preceding quarter. As long as the high lease volume persists, the prognosis for fresh supply has improved.
Compared to the previous quarter, when 45% of poll respondents had the same opinion, 54% of respondents in Q3 2023 expect office rents to rise.
Buoyancy in office market outlook
| Q3 2023 | Office Leasing | New Office Supply | Office Rents |
| Same | 33% | 39% | 39% |
| Increase | 52% | 49% | 54% |
| Decrease | 15% | 12% | 7% |
Resilient economic scenario
Stakeholder opinions regarding the general economic momentum have only gotten stronger over the last year, according to the survey’s results. 56% of poll participants in Q3 2023 had higher expectations for the momentum of economic expansion than did 55% in Q2 2023. It is expected that corporate and consumer optimism would increase as long as India’s domestic economy remains stable.
Within the following six months, 44% of respondents to a study conducted in the third quarter of 2023 anticipate a rise in funding availability. 49% of survey participants in Q2 2023 had a similar viewpoint. Stability was indicated by the 67% decline in total foreign direct investment (FDI) received in the year prior between April and July 2023. Therefore, the research shows that throughout the next six months, there was a decrease in the attitude towards new investment inflows.
| Q3 2023 | Overall Economic Momentum | Availability of Funding |
| Increase | 56% | 44% |
| Same | 27% | 46% |
| Decrease | 17% | 10% |
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