Macroeconomic factors, better consumer confidence push industry optimism up

However, most Indians now expect residential prices to increase in the next six months

India's macroeconomic indicators and improving domestic consumer confidence have boosted the optimism of the industry regarding their performance in the next six months, a new report has revealed.

According to the Knight Frank-Naredco Real Estate Sentiment Index, released on Friday, the Future Sentiment Score jumped from 58 in the quarter that ended December 2022 to 61 in the quarter that ended March 2023.

"Despite the uncertainty on the global stage, stakeholders are optimistic about the Indian economy and the real estate sector's performance for the next six months," it said.

"In Q1CY23, the percentage of survey respondents that expected residential sales to increase rose to 48 per cent as compared to 41 per cent of the respondents in Q4CY21," it added.

 

However, the report also highlighted that most Indians now expect residential prices to increase in the next six months.

"In Q1CY23, 61 per cent of the survey respondents expect residential prices to increase in the next six months. In comparison, during Q4CY22, 47 per cent of the survey respondents held a similar view," it said.

The Current Sentiment Score, which shows the current expectations of the people, was moderated in Q1CY23. From 59 in the previous quarter, it fell to 57 in the quarter that ended in March. This is mainly due to the global recessionary environment and the risk of a future global downturn.  

"Moving into the second quarter of 2023, the Indian economy and real estate sector are showing resilience and an optimistic outlook despite the possibility of a global economic slowdown. Although the Current Sentiment Index Score has decreased from the previous quarter, we still have confidence in India's real estate market due to the rise in the Future Sentiment Score," said Rajan Bandelkar, president of Naredco.

"The domestic consumer inflation has softened in many major economies including in India in March 2023. Coupled with strong macroeconomic statistics, India remains largely resilient to global challenges while consumer confidence remains high. This is reflected well in the current sentiment index score that continues to be in the optimistic zone for seven consecutive quarters," said Shishir Baijal, chairman and managing director at Knight Frank India.

The Future Sentiment Score has dipped marginally from 62 in Q4CY22 to 61 in Q2CY23 for developers. In the case of non-developers, including banks and financial institutions, the sentiment has risen from 55 to 61 in the same period.

The recent pause in the repo rate hikes by the Reserve Bank of India (RBI) has boosted the sentiment of non-developers, it added.