Real estate sentiment index falls to 49 as caution spreads

The Knight Frank-NAREDCO real estate sentiment index slipped into pessimistic territory in the first quarter of 2026, as global uncertainty and rising costs weighed on developers, investors and lenders. The current sentiment score fell to 49 from 60 in the previous quarter, the 48th edition of the index showed. A score below 50 marks pessimistic territory, so the drop of 11 points took the real estate sentiment index across that line for the first time in recent years.

The future sentiment score also fell, to a neutral 50 from 61 in the fourth quarter of 2025. That reading means stakeholders expect conditions to stay roughly where they are over the next six months, rather than improving or getting worse. The Knight Frank NAREDCO survey reflects the views of developers, investors and financial institutions on economic conditions and funding availability.

Why the real estate sentiment index fell in early 2026

The fall in the real estate sentiment index was driven largely by global economic volatility. Higher crude oil prices pushed up inflation, which raised construction, logistics and financing costs and hit project viability. Tighter financial conditions made stakeholders more careful. India's domestic economic fundamentals stayed largely stable, but geopolitical tensions began to affect both demand and supply in the property market.

Housing sales outlook in the real estate sentiment index

The housing sales outlook in the survey turned cautious after a long run of growth. Sales and new launches slowed in the first quarter of 2026, reflecting both a cyclical cooling and careful buyer sentiment. Around 52 percent of stakeholders expect housing sales to fall in the near term. At the same time, 73 percent believe property prices will either stay stable or keep rising, because higher input and borrowing costs leave builders little room to cut prices. That gap between softer demand and firm prices is one of the clearest findings of the survey.

Nearly half of respondents to the real estate sentiment index expect a slowdown in new project launches. The housing sales outlook therefore points to fewer launches and slower sales, but not to falling prices. Industry watchers described the phase as a short-term recalibration rather than a deep slowdown, noting that end-user demand and steady price trends still support the sector over a longer period.

Office leasing in the real estate sentiment index

Office leasing was the exception in an otherwise careful survey. Leasing activity reached a record high in the first quarter of 2026, and limited supply in key markets is supporting rental growth. About 41 percent of stakeholders expect leasing demand to improve further in the near term. Office leasing has held up while housing cooled, which is why the office segment is described in the report as the bright spot of the market.

The survey's later edition showed the mood levelling off rather than falling further. In the second quarter of 2026, the current sentiment score edged down to 48 from 49, while the future sentiment score held steady at 50. Developer sentiment stayed flat at 51, just above neutral, while sentiment among banks, financial institutions and private equity investors improved to 53 from 50. Shishir Baijal, international partner, chairman and managing director of Knight Frank India, said the sharp decline seen in the first quarter had levelled off, with future sentiment holding steady at the neutral threshold.

The real estate sentiment index will be watched closely in the next edition for signs of whether caution is easing or settling in, and the Knight Frank NAREDCO survey remains the main read on developer and lender mood. For now, the survey describes a market that is adjusting to higher costs and global uncertainty, with housing careful, offices resilient and prices holding firm.