Sentiment in realty sector moderates on interest rate hike, global headwinds but remains optimistic: Report

New Delhi: Real estate developers, investors and financial institutions are optimistic about the growth in the realty sector over the next six months, but sentiment has moderated due to a hike in mortgage rates and global recessionary fears, according to Knight Frank and Naredco.

Property consultant Knight Frank and realtors' body NAREDCO on Thursday released the 'Real Estate Sentiment Index Q3 2022 (July-September 2022)' report.

The current sentiment score has declined marginally from 62 in April-June 2022 to 61 in July-September 2022, on account of the economic scenario playing out globally.

The sentiment index is based on the survey of supply-side stakeholders like developers, investors and financial institutions. A score of above 50 indicates 'optimism' in sentiments, a score of 50 means the sentiment is 'same' or 'neutral'. A score below 50 indicates 'pessimism'.

"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 the perception of the Indian economy and real estate remains resilient thus far," Knight Frank said in a statement.

The Future Sentiment Score, which measures stakeholder perceptions for the real estate sector over the next six months, has decreased from 62 in Q2 of 2022 to 57 in Q3 of 2022.

"As inflation remains high in India, tightening monetary policy measures and an adjusted economic growth forecast has altered the stakeholder sentiment for the next six months," the consultant said.

Both the current sentiment and the future sentiment score have moderated in Q3 2022 as stakeholders exercise caution as the impact of the global economic headwinds on the Indian economy is yet to play out.

Additionally, housing affordability has shrunk further after the repo rate hike in September 2022, Knight Frank said.

"The real estate sector over the past few quarters continues to be strong. However, because of the headwinds caused by the high rate of inflation and geo-political tensions, the future sentiment index has shown a marginal decline and that could influence the developers’ sentiment in general in the next few quarters," Shishir Baijal, Chairman and Managing Director, Knight Frank India, said.

Rajan Bandelkar, President of NAREDCO, said, the sector has been consistently growing in housing sales and volumes for the past several months and has shown resilience despite the global uncertain economic conditions and soaring inflation.

"Despite inflationary pressures, prospective homebuyers will continue to invest in the market," he added.