Indian Real Estate Sector Shows Signs of Stabilisation as Future Sentiment Holds Neutral: Knight Frank–NAREDCO
Mumbai, July 23, 2026: India’s real estate sector is entering a phase of stabilisation despite persistent global headwinds, according to the 49th edition of the Knight Frank–NAREDCO Real Estate Sentiment Index for the second quarter of 2026 (April–June). While the Current Sentiment Score softened slightly to 48 from 49 in the previous quarter, remaining in pessimistic territory, the Future Sentiment Score held steady at 50, signaling that the sharp deterioration experienced in early 2026 has leveled off.
The continued moderation in sentiment is primarily driven by external factors such as geopolitical tensions, volatile energy prices, and persistent inflationary pressures that cloud the broader global economic landscape. However, the inherent resilience of India’s domestic economy, sustained occupier demand in the commercial office space, and a gradual reduction in pessimism across major industry indicators indicate that stakeholder confidence is finding its footing.
Stakeholder sentiments vary slightly across different market segments. Developer sentiment remained flat at 51, unchanged from the previous quarter, showing that while the steep decline seen earlier has stopped, post-pandemic highs have yet to return. On the other hand, non-developer stakeholders—including banks, financial institutions, and private equity investors—recorded a positive shift in confidence, with their score rising to 53 in Q2 2026 from 50 in Q1 2026. This measured recovery among non-developers suggests that capital providers have grown more comfortable with prevailing market conditions after reacting sharply to global uncertainties earlier in the year.
“The current score has slipped a point to 48, reflecting a global environment that remains fast-evolving and difficult to read,” said Parveen Jain, National President of NAREDCO. “The future score, however, holds firm at the neutral threshold of 50 — a signal that stakeholders see the challenges persisting rather than deepening, and that the sharp decline of the previous quarter has levelled off. Residential is settling into a more mature phase, a normalisation rather than a weakening, while office continues to anchor the market with resilient leasing and firm rents. The pressures at play are external in origin, and India’s real estate fundamentals remain robust enough to absorb them.”
From a geographic perspective, sentiment hovered near the neutral threshold across all regions. The North Zone saw a modest recovery to 52 in Q2 2026, bolstered by strong office market activity, while the West Zone held steady at 50. The South and East Zones remained more cautious as industry participants continued to evaluate evolving macroeconomic developments.
The residential property sector is undergoing a period of moderation following years of continuous growth. Housing sales across major markets rose by a marginal 1% year-on-year in the first half of 2026, marking a transition toward a more mature and steady growth phase. Pessimism among residential stakeholders appears to be cooling, with only 45% expecting demand to weaken over the next six months compared to 52% in the prior quarter. On the supply side, the share of respondents anticipating slower launch momentum dropped to 38% from 45%. Property pricing remains firm, with 74% of respondents expecting residential prices to either stay stable or increase over the coming half-year due to persistent input and labor costs.
Conversely, the commercial office market continues to act as the primary anchor for overall real estate sentiment. Office space transactions reached 48 million square feet in H1 2026, dipping just 2% year-on-year despite competing against an exceptionally high base from the previous year. Demand remains driven by Global Capability Centres (GCCs), technology firms, and corporate expansions. Confidence in leasing remains robust, with 74% of respondents expecting leasing volumes to remain stable or improve over the next six months. Furthermore, 76% anticipate stable or improved new supply completions, while 81% expect office rents to remain steady or rise due to limited high-quality Grade A inventory in key hubs.
“The real estate sector continues to navigate a complex global environment characterised by geopolitical tensions, inflationary pressures and volatile energy markets,” said Shishir Baijal, International Partner, Chairman and Managing Director of Knight Frank India. “While these factors have weighed on current sentiment, the more significant takeaway from this quarter’s findings is the sharp decline witnessed in the previous quarter has levelled off, with future sentiment holding steady at the neutral threshold. The residential market is transitioning into a phase of normalisation after a prolonged growth cycle, while the office segment continues to demonstrate resilience supported by robust leasing activity and sustained occupier demand. India’s strong domestic fundamentals, coupled with its position as the fastest-growing major economy, continue to provide confidence in the sector’s long-term growth prospects.”
Broader economic and funding perspectives are also reflecting measured improvement. The percentage of stakeholders expecting overall economic conditions to deteriorate dropped sharply from 50% in Q1 2026 to 36% in Q2 2026, while 31% expect momentum to pick up. Regarding project financing, half of the surveyed respondents expect funding conditions to stay unchanged, while 19% anticipate better availability of capital. While private equity activity slowed in the first half of the year due to tight international monetary environments, investors remain actively focused on high-quality Indian real estate assets with strong execution capabilities and viable risk-adjusted returns.
