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Current Sentiment Score declines marginally from 62 to 61 in Q3 2022

Mumbai : The latest edition of Knight Frank-NAREDCO Real Estate Sentiment Index Q3 2022 (July - September 2022) report cited that the Current Sentiment score has declined marginally from 62 in Q2 2022 to 61 in Q3 2022 on account of the economic scenario playing out globally. The Current Sentiment Index score has scaled down, primarily because of the dark global economy and the current geopolitical risk due to the Russia-Ukraine war. Although it has declined marginally, it still shows optimism since perception of the Indian economy and the real estate remains resilient thus far.

The Future Sentiment Score, which measures stakeholder perceptions for the real estate sector over the next six months, has decreased from 62 in Q2 2022 to 57 in Q3 2022. As inflation remains high in India, tightening monetary policy measures and an adjusted economic growth forecast have altered the stakeholder sentiment for the next six months. Both the Current and Future Sentiment Scores have remained mild despite the fall. The Current Sentiment Index score and the Future Sentiment score have moderated in Q3 2022 as stakeholders exercise caution as the impact of the global economic headwinds on Indian economy is yet to play out. Additionally, the housing affordability has shrunk further after the repo rate hike in September 2022.

Future Sentiment Score hints at a decline in housing market momentum in Q4 2022

Since the inception of the Real Estate Sentiment Index, the Future Sentiment Score has largely remained above 50, indicating the prevalence of a positive homebuying sentiment in the market. In the past four years, multiple market forces have impacted the sentiments of both homebuyers and developers. Per our analysis, the overall volume witnessed across the top eight Indian cities each quarter mirrored the trajectory indicated by the Future Sentiment Score in the preceding quarter

Compared to residential sales which show a high correlation since the Real Estate Sentiment Index survey captures the perception of the supply side stakeholders, residential launches have an even higher degree of sensitivity to Future Sentiment score. Per findings of our analysis, 65% and 62% variation in residential launches and sales respectively, can be explained by the Future Sentiment score

The volume of residential sales and launches which have declined sequentially from Q2 2022 to Q3 2022, are likely to shrink further in Q4 2022 on both parameters. This is not surprising, as the impact of the cumulative repo rate hike of 190 basis points is yet to be passed on fully to homebuyers, the festive period discounts on home loans will no longer be available after October 2022, and the geopolitical tensions and inflationary risks will continue to persist in the foreseeable future.

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