Q1 2026 Real Estate Sentiment Weakens Amid Global Uncertainties: Report

India’s real estate sentiment score fell sharply to 49 in Q1 2026 (January–March) from 60 in Q4 2025, slipping into pessimistic territory amid rising global uncertainties, according to the Knight Frank-Naredco Real Estate Sentiment Index.

The decline marks a break from the sustained optimism seen in recent years. The future sentiment score also dropped to a neutral 50 from 61 in the previous quarter, indicating a cautious outlook.

The moderation is largely driven by global macroeconomic volatility. Elevated crude oil prices have intensified inflationary pressures, pushing up construction and logistics costs and affecting project viability. Tighter financial conditions have also made stakeholders more cautious. While India’s economic fundamentals remain stable, geopolitical conditions are beginning to influence real estate demand and supply dynamics, the report said.

The residential segment is showing signs of recalibration after a prolonged growth cycle. Sales and new launches moderated in Q1 2026, reflecting cyclical consolidation and cautious buyer sentiment. Demand is expected to soften further in the near term, even as property prices remain firm or continue rising.

In contrast, office leasing activity reached a record high in Q1 2026. The quarterly index captures current and future sentiment towards the real estate sector, economic conditions, and funding availability as perceived by developers, financial institutions, and investors. A score of 50 indicates neutrality, above 50 reflects positive sentiment, and below 50 indicates pessimism.

Non-developer stakeholders, including financial institutions and investors, saw a sharp fall in confidence, with their future sentiment score dropping to 50 in Q1 2026 from 63 in Q4 2025. Developers also moderated their outlook, with their future sentiment score declining to 51 from 58.

Regionally, sentiment softened across all zones. The North and South slipped into pessimistic territory, while the West remained relatively resilient, staying above the neutral mark despite some demand moderation.

Shishir Baijal, international partner, chairman, and managing director of Knight Frank India, said, “The moderation in sentiment reflects the growing influence of global uncertainties, particularly energy market disruptions and geopolitical tensions. In the near term, stakeholders are likely to remain in a wait-and-watch mode as they assess the evolving macroeconomic environment.”

The residential market is witnessing a natural moderation after a strong growth cycle. Demand expectations have weakened, with 52 per cent of respondents expecting housing sales to drop. Nearly half of stakeholders expect fewer new launches, while a significant proportion anticipate stability, reflecting developer caution.

Despite weaker demand, residential prices remain firm. Around 73 per cent of respondents expect prices to rise or stay stable, while only 27 per cent foresee a decline. Rising input costs, including materials, labour, and borrowing, continue to support pricing.

Praveen Jain, national president of Naredco, said, “The recent softening in residential sentiment can be seen as a natural recalibration following a sustained growth phase, with end-user demand and steady price appreciation continuing to support resilience. As global uncertainties ease, the residential segment is expected to regain momentum and sustain its growth trajectory.”

The office market outlook remains strong, though growth has slowed slightly. Leasing demand remains steady, with 41 per cent of respondents expecting improvement and 36 per cent expecting stability, while 23 per cent foresee a decline amid macroeconomic uncertainty.

Office supply trends remain positive, with nearly half of stakeholders expecting more completions. Rental outlook also remains strong, with most expecting rents to rise or stay stable due to limited premium office supply and strong demand from Global Capability Centres (GCCs).

On the broader economy, 29 per cent of respondents expect improvement, while 50 per cent anticipate worsening conditions over the next six months. The funding outlook remains cautious, with 33 per cent expecting easier access to funds, 43 per cent expecting no change, and 24 per cent anticipating tighter liquidity, reflecting rising risk aversion and more selective investments.