India realty sentiment falls to 49 in Q1 2026 on global headwinds; office leasing stays resilient: Knight Frank India

India’s real estate sentiment slipped into pessimistic territory in the first quarter of 2026, as global macroeconomic headwinds triggered a sharp correction in stakeholder confidence, according to a research report by Knight Frank India. The firm’s latest Sentiment Index shows the Current Sentiment Score falling to 49 from 60 in Q4 2025, while the Future Sentiment Score declined to a neutral 50 from 61, indicating a clear shift from optimism to caution.

The report attributes the moderation to rising crude oil prices, persistent inflation and geopolitical uncertainties, which have pushed up construction and financing costs while tightening liquidity conditions. These factors are beginning to weigh on both demand and supply dynamics, even as India’s core economic fundamentals remain stable.

Commenting on the findings, Shishir Baijal, Chairman and Managing Director, Knight Frank India, said the sector is witnessing a “cautious recalibration” driven by global uncertainties, particularly energy market disruptions and geopolitical tensions, with stakeholders likely to adopt a wait-and-watch approach in the near term.

Residential market shows signs of cooling

The residential segment, which had seen strong growth over the past few years, is now entering a consolidation phase. As per Knight Frank India’s findings, 52% of stakeholders expect housing sales to decline in the near term, while 45% anticipate a slowdown in new project launches.

However, price trends remain firm despite weakening demand. Nearly 73% of respondents expect residential prices to either increase or stay stable, reflecting elevated input costs across materials, labour and financing. This divergence between softening demand and resilient pricing underscores the structural cost pressures shaping the housing market.

Investor and lender sentiment has also turned more cautious. Non-developer stakeholders—including financial institutions and private equity investors—saw their future sentiment score drop sharply to 50 from 63 in the previous quarter. Developers, while relatively more optimistic, also pared expectations, with their outlook easing to 51 from 58.

Commercial real estate remains a bright spot

In contrast, the office segment continues to demonstrate resilience and remains the key support for the sector. Knight Frank India noted that leasing activity remained robust in Q1 2026, with 41% of respondents expecting improvement and 36% projecting stable demand.

Supply pipelines remain active, particularly for Grade A office assets, with nearly half of stakeholders expecting higher completions. Rental outlook is also strong, with 81% anticipating rents to either rise or remain stable, supported by limited premium supply and sustained demand from Global Capability Centres.

Economic outlook turns guarded

The broader economic sentiment has weakened considerably, with 50% of respondents expecting conditions to deteriorate over the next six months, compared with just 29% anticipating improvement. While funding availability is expected to remain largely stable, a growing proportion of stakeholders foresee tighter liquidity, signalling more selective investment strategies.

Meanwhile, Praveen Jain of NAREDCO stated that the moderation reflects short-term caution rather than a structural slowdown, adding that underlying demand and price stability continue to support the sector’s long-term outlook.