The Indian real estate sector entered 2025 on a note of measured optimism, as revealed in the Q1 2025 Knight Frank–NAREDCO Real Estate Sentiment Index Report. While stakeholder confidence dipped slightly compared to the previous quarter, the sector remains cautiously hopeful, especially in the office and premium housing segments.
The Current Sentiment Score dropped to 54 in Q1 2025 from 59 in Q4 2024. Similarly, the Future Sentiment Scoreeased to 56, reflecting a subtle but clear shift toward caution due to global economic volatility, regional tensions, and consumption softening. Despite this dip, both scores remain above 50 — indicating continued, albeit restrained, optimism.
Residential Market Sees Cooling Demand
The residential segment, particularly in the mid- and lower-ticket categories, is seeing signs of slowing demand:
- Only 22% of stakeholders expect residential sales to increase, a sharp decline from 73% in Q1 2024.
- 93% believe that prices will either remain stable or rise, although the share expecting actual price increases has dropped to 50%, down from 82% a year ago.
- New launches are also expected to slow, with only 28% of stakeholders anticipating growth in supply.
This reflects a shift toward pricing stability and recalibration of supply strategies, particularly in response to affordability concerns in the mass housing segment.
Office Sector Emerges as a Bright Spot
In contrast, the office segment continues to perform strongly:
- 82% of respondents expect office leasing volumes to increase or remain steady.
- 91% foresee stable or rising rental values, signaling strong occupier confidence.
- Although only 24% expect an increase in new office supply, high demand absorption is keeping the segment resilient.
Key demand drivers include Global Capability Centres (GCCs), IT services, and flex space operators, particularly in metro markets like Bengaluru, Hyderabad, and Pune.
Developers & Financial Institutions: A Cautious Stance
- The Developer Future Sentiment Score declined to 53, as developers adopt a more demand-led approach and focus on high-ticket projects.
- The Non-Developer Sentiment Score — which includes banks, financial institutions, and private equity funds — also fell slightly to 57, indicating a wait-and-watch approach on capital deployment.
Both groups remain selectively optimistic, especially about premium residential and commercial real estate, while being conservative about mass housing and speculative launches.
Macroeconomic Sentiment Dips Amid Global Headwinds
Economic expectations have softened:
- Only 55% of stakeholders believe the economic momentum will improve or stay the same — significantly down from 91% in Q1 2024.
- Global trade tensions and regional instability are contributing to uncertainty.
However, recent RBI repo rate cuts in February and April 2025 have improved liquidity and borrowing sentiment, with 79% of respondents expecting funding availability to improve or remain stable.
Industry Leaders Weigh In
Shishir Baijal, Chairman and Managing Director of Knight Frank India, commented:
“Q1 2025 marks a phase of strategic recalibration for the sector. Premium residential and commercial segments continue to display strength, underlining the industry’s long-term resilience.”
Hari Babu, President of NAREDCO, added:
“This marginal dip in sentiment is not a sign of decline, but of maturity. The industry is moving forward cautiously but confidently, adapting to shifting market dynamics.”
Conclusion
The Q1 2025 Sentiment Index highlights a sector at a crossroads — cautiously optimistic but highly strategic. While residential demand in the affordable and mid-income segments moderates, premium housing and commercial office spaces continue to drive the industry forward. With liquidity improving and developers adapting quickly, Indian real estate remains on stable ground despite external challenges.
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