Housing shows signs of recalibration after a prolonged growth cycle, with Q1 2026 sales and launches moderating amid cautious sentiment, a report has said

Real estate developers and financial institutions are turning cautious, marking a clear break from recent optimism, with a guarded outlook for the sector at least until September amid global uncertainties. Volatility, elevated crude oil prices driving inflation and construction costs, and tighter financing conditions are weighing on sentiment. Geopolitical risks are increasingly shaping demand and supply despite stable domestic fundamentals, according to the Q1 2026 Real Estate Sentiment Index released by Knight Frank and NAREDCO.

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, the report noted.

The 48th edition of the Knight Frank–NAREDCO Real Estate Sentiment Index for Q1 2026 (January–March 2026) showed that the Current Sentiment Score declined 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.

It pointed out a "notable departure from the sustained optimism in recent years in stakeholder sentiment" and 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.

In contrast, prices remain resilient despite weakening demand, with 73% of respondents expecting them to rise or stay stable, and only 27% predicting a decline. Elevated input costs, across materials, labour and financing, continue to support price levels and are likely to be passed on to buyers. This divergence between softer demand and firm pricing underscores the structural cost pressures currently shaping the residential 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, it noted.

What is the sentiment index

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.

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.

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.”

"In the near term, stakeholders are likely to remain in a wait-and-watch mode as they assess the evolving macroeconomic environment," he added.

“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,” said Praveen Jain, National President-NAREDCO.