The 48th edition of the Knight Frank–NAREDCO Real Estate Sentiment Index for Q1 2026 (January–March 2026) reflects a notable departure from the sustained optimism in recent years in stakeholder sentiment. Amid rising global uncertainties that weigh on the sector’s outlook, the Current Sentiment Score declines sharply to 49 from 60 points in Q4 2025, slipping into pessimistic territory. The Future Sentiment Score stands at a neutral 50 points, also recording a decline from 61 points in Q4 2025.

The moderation in sentiment is largely driven by global macroeconomic volatility. Elevated crude oil prices have intensified inflationary trends, impacting construction and logistics costs, affecting project viability. At the same time, tighter financial conditions have led stakeholders to adopt a cautious stance. Even while India’s economic fundamentals remain largely stable, geopolitical conditions are beginning to influence real estate demand and supply dynamics.

The residential segment is showing signs of recalibration following a prolonged growth cycle. Sales and new launches have moderated in the first quarter of 2026, reflecting both cyclical consolidation and cautious buyer sentiment. Demand is expected to further soften in the near term, even as property prices remain firm or continue rising. This divergence between demand moderation and price resilience highlights the structural cost challenges currently shaping the market.

In contrast, the office segment continues to demonstrate resilience and remains the bright spot for the sector. Leasing activity reached a record high during Q1 2026. Limited supply in key markets is supporting rental growth, with stakeholders expecting stable to improving leasing momentum in the near term.

The quarterly Knight Frank-NAREDCO index captures the current and future sentiments towards the real estate sector, as well as economic conditions and funding availability as perceived by the supply-side stakeholders and financial institutions. A score of 50 represents a neutral view or status quo; a score above 50 demonstrates a positive sentiment; and a score below 50 indicates a negative sentiment.

Sentiments of Developers and Non-Developers

Stakeholder sentiment has turned more guarded compared to the previous quarter. Non-developer stakeholders, including financial institutions and investors, demonstrated a sharp drop in confidence, with the future sentiment score declining to 50, from higher optimistic levels of 63 in Q4 2025. Developers have also moderated their outlook, with their future sentiment score easing to 51 from 58 in the previous quarter. These highlights rising risk sensitivity among capital providers, even as developers remain cautiously optimistic.

Regionally, sentiment has softened across all zones compared to the previous quarter. The North and South regions slipped into pessimistic territory, while the West zone remained relatively resilient, staying above the neutral threshold, despite some demand moderation.

Commenting on the findings, Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India, said, “The moderation in sentiment reflects the growing influence of global uncertainties, particularly energy market disruptions and geopolitical tensions. While India’s economic fundamentals remain robust, the real estate sector is entering a phase of cautious recalibration. The residential segment is witnessing a natural moderation after a strong growth cycle, while the office market continues to exhibit resilience driven by strong occupier demand. In the near term, stakeholders are likely to remain in a wait-and-watch mode as they assess the evolving macroeconomic environment.”

Residential market outlook

The residential market is witnessing a natural moderation after a strong growth cycle in Q1 2026. Demand expectations have weakened notably, with 52% of respondents expecting housing sales to drop. With the sentiment being more negative than before, the market is adjusting after a growth phase.

A similar moderation is visible on the supply side, as new project launches slowdown. With nearly half of the stakeholders expecting fewer new launches, a significant proportion anticipates stability and developers are being more cautious. This marks a distinct shift from the stronger launch activity observed earlier in 2025.

In contrast, residential prices still hold strong even though demand is weakening. A substantial 73% of respondents expect prices to either increase or remain stable, while only 27% foresee a decline. Rising costs are keeping prices up, with materials, labour and loans getting more expensive.  These costs are likely to increase property costs for buyers. The divergence between weakening demand sentiment and firm pricing expectations highlights that rising structural costs are driving the residential market.

Praveen Jain, National President-NAREDCO, said, “Real estate sentiment has moderated amid global macroeconomic headwinds and inflationary pressures; however, this reflects short-term caution among stakeholders rather than any weakening in the residential market’s underlying strength. 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.”

“At the same time, the commercial segment remains a key area of strength, with stable to improving leasing activity and firm rental trends reflecting sustained occupier confidence. As global uncertainties ease, the residential segment is expected to regain momentum and sustain its growth trajectory.”

Office market outlook

The office market outlook is still strong, though growth has slowed slightly, compared to the previous quarters. Office leasing demand remains steady, with 41% of respondents expecting improvement and 36% expecting stability. However, a smaller group of 23% foresee a decline, as caution increases due to macroeconomic uncertainties. However, the core occupier demand remains robust.

A similar trend is observed in the office supply outlook with nearly half of the stakeholders expecting more completions, and others expecting stable or lower supply. This suggests that while developers remain committed to delivering projects, they are also mindful of evolving demand conditions and capital considerations. The supply outlook continues to be supported by sustained demand for high-quality Grade A spaces, even as overall sentiment moderates.

Rental outlook looks strong despite market caution, with majority expecting rents to rise or stay stable. While 81% see rents holding or increasing, very few expects rent drops.  While low supply of premium offices is supporting rents, high demand from Global Capability Centres is driving the market, which continues to push rents upwards.

Economic Scenario

The economic outlook has softened in Q1 2026, with stakeholder sentiment turning noticeably cautious amid rising global uncertainties. The share of respondents expecting economic improvement has declined to 29%, while a majority 50% believe conditions will worsen over the next six months. Around 21% anticipate stability, indicating that the overall outlook is now cautious compared to balanced earlier. This moderation reflects concerns around a global growth slowdown, with inflation and high energy prices being key worries as geopolitical tensions add to the risk.

The funding outlook is steady but cautious. About 33% of respondents expect an easier access to funds while 43% anticipate no change, suggesting that liquidity conditions are likely to hold steady in the near term. However, a smaller group of 24% foresee tighter funding, reflecting increased risk aversion among investors and financial institutions. This indicates a shift toward more selective investments, with greater emphasis on quality assets and careful pricing, marking lesser aggressive growth and a more disciplined strategy.

Overall, the Q1 2026 Sentiment Index highlights a transition phase for the Indian real estate sector. While global challenges are making stakeholders cautious, the core market strength remains intact. While the residential market is adjusting to a more sustainable trajectory, the office segment continues to anchor growth. The future sentiment depends on global factors, with energy markets and geopolitics being the key influencers.   These factors will highly impact investment decisions and recovery speed across the sector.