India's Real Estate Sector Shows Optimism in Q2 2025 with Strong Demand and Policy Support
India's real estate market is experiencing a resurgence in Q2 2025, driven by macroeconomic stability, RBI rate cuts, and robust demand in premium housing and office spaces. The Knight Frank–NAREDCO Real Estate Sentiment Index highlights a marked improvement in confidence among developers, investors, and institutions.
Real EstateEconomic StabilityPremium HousingCommercial LeasingRbi Rate CutsReal EstateJul 30, 2025
According to the 45th edition of the index, the Current Sentiment Score rose to 56 in Q2 2025 from 54 in the previous quarter, while the Future Sentiment Score jumped to 61, up from 56. Both figures reflect a shift toward optimism after four quarters of cautious outlook.
Policy easing and a revival in demand are the primary drivers of this recovery. A confluence of favorable economic indicators—including a six-year low in CPI inflation (3.2%), record GST collections of Rs 2.4 lakh crore, and a 100-basis-point rate cut by the RBI in H1 2025—has helped rejuvenate stakeholder sentiment. These developments have improved liquidity, lowered borrowing costs, and sparked confidence in high-value residential and commercial segments.
“This quarter marks a turning point,” said Shishir Baijal, Chairman and MD, Knight Frank India. “Improved macro fundamentals and maturing sector strategies are enabling stakeholders to realign toward long-term growth, especially in premium and yield-accretive assets.”
Developers exhibited the sharpest rise in confidence, with their Future Sentiment Score climbing from 53 to 63. Factors such as easier financing, stronger demand for luxury housing, and sustained commercial leasing in urban hubs are reinforcing their outlook. Non-developer participants—banks, NBFCs, and private equity players—also reflected higher optimism, with their sentiment score increasing to 60 from 57. Structured funding opportunities in premium residential and office markets continue to attract institutional capital.
Across regions, sentiment rebounded, with the South leading at a score of 63, thanks to resilient markets like Bengaluru and Hyderabad. The North, previously hit by post-COVID uncertainty, rose from 48 to 55, while the West and East maintained a strong footing at 61 each. A strong 70% of stakeholders expect residential launches to remain stable or grow, with a marked preference for premium homes priced above Rs 1 crore. However, developers remain cautious on affordable housing due to tight margins and rising costs.
Price expectations also held strong, with 94% of stakeholders anticipating stable or rising prices, backed by double-digit year-on-year growth in cities like Bengaluru, Delhi-NCR, and Chennai. The office segment continues to perform well, buoyed by demand from Global Capability Centres (GCCs), third-party IT firms, and flex-space operators. About 80% of respondents foresee leasing volumes staying strong or improving, while 93% expect rentals to remain stable or rise.
Bengaluru, Hyderabad, and Pune remain focal points, despite tight Grade A supply. Developers are taking a cautious approach to new commercial development, focusing instead on meeting targeted residential demand. Improved credit availability, thanks to the RBI’s 100-bps rate cut, has significantly boosted funding sentiment. Ninety percent of stakeholders expect access to capital to stay stable or improve, compared to 79% in the previous quarter.
Additionally, robust macroeconomic indicators—ranging from record GST collections to an expanding PMI—have added to the positive outlook. About 70% of stakeholders now expect India’s economic momentum to sustain or improve, up from 55% in Q1.
Hari Babu, President of NAREDCO, noted that the Q2 results signal the sector’s growing resilience. “Backed by lower borrowing costs, policy support, and strong demand for premium real estate, India’s property market is on a strong footing for continued growth through 2025,” he said.
Frequently Asked Questions
What factors are driving the optimism in India's real estate sector?
The optimism in India's real estate sector is driven by macroeconomic stability, RBI rate cuts, and robust demand in premium housing and office spaces. Favorable economic indicators such as low CPI inflation, record GST collections, and improved liquidity are also contributing to the positive sentiment.
How has the Knight Frank–NAREDCO Real Estate Sentiment Index changed in Q2 2025?
In Q2 2025, the Current Sentiment Score rose to 56 from 54 in the previous quarter, while the Future Sentiment Score jumped to 61, up from 56. This indicates a shift toward optimism after four quarters of cautious outlook.
Which regions are showing the strongest real estate sentiment in Q2 2025?
The South leads in real estate sentiment with a score of 63, thanks to resilient markets like Bengaluru and Hyderabad. The North, previously affected by post-COVID uncertainty, has risen from 48 to 55, while the West and East maintain a strong footing at 61 each.
What are the expectations for residential launches and prices?
Seventy percent of stakeholders expect residential launches to remain stable or grow, with a preference for premium homes priced above Rs 1 crore. Ninety-four percent of stakeholders anticipate stable or rising prices, backed by double-digit year-on-year growth in cities like Bengaluru, Delhi-NCR, and Chennai.
How is the commercial office market performing?
The commercial office market is performing well, driven by demand from Global Capability Centres (GCCs), third-party IT firms, and flex-space operators. Eighty percent of respondents foresee leasing volumes staying strong or improving, while 93% expect rentals to remain stable or rise.
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