By Mumbai, July 29, 2025: The 45th edition of the Knight Frank-NAREDCO Real Estate Sentiment Index for Q2 2025 (April-June) marks a significant shift in the mood of the Indian real estate sector. Following a year-long moderation in sentiment, stakeholders are beginning to look beyond short-term global uncertainties and are anchoring their expectations on India’s structural economic strength, accommodative monetary policy, and robust demand in premium residential and office segments.
The Current Sentiment Score rose modestly to 56 in Q2 2025 from 54 in Q1 this year, snapping a four-quarter downward streak, while the Future Sentiment Score climbed to 61 in this quarter from 56 a quarter ago, signalling a renewed sense of confidence and cautious optimism about the sector’s performance in the next six months.
Sectoral Rebound Driven by Macroeconomic Stability and Policy Support
India’s real estate stakeholders appear to be responding positively to improving macroeconomic indicators. With CPI inflation at a six-year low of 3.2%, record GST collections touching ₹2.4 lakh crore, and a 100-basis point (BPS) cumulative repo rate cut by the Reserve Bank of India in H1 2025, the economic environment has become more conducive to growth and investment. These factors have improved liquidity, lowered the cost of borrowing, and re-energised both developers and funding institutions.
Shishir Baijal, Chairman and Managing Director – Knight Frank India, said, “Q2 2025 represents a turning point for the real estate industry with the recovery in both current and future sentiment scores reflects the sector’s resilience and adaptability. As high-frequency indicators show sustained momentum, stakeholders are repositioning their strategies for long-term growth, especially in premium and high-yielding asset classes. The rise in pre-leasing activity, strategic launch planning, and lender confidence underscores the industry’s growing maturity.”
Overall Sentiment Score
Gradual Recovery in Stakeholder Sentiment
Score >50: Optimism Score =50: Neutral/SameScore <50: Pessimism
Source: Knight Frank India
Sentiments of Developers and Non-Developers
One of the most encouraging signs in this quarter’s index is the resurgence in developer confidence. The sentiment among developers has seen a sharp increase, with their Future Sentiment Score rising from 53 in Q1 to 63 in Q2 2025. This change is largely attributable to easing financing conditions, falling borrowing costs following a 100-BPS cumulative repo rate cut by the Reserve Bank of India in H1 2025, and a visible pick-up in high-ticket residential demand. Developers are also encouraged by the continued strength of the commercial real estate segment, especially in key urban hubs, which has bolstered their outlook for the rest of the year.
Notably, non-developer stakeholders, which include banks, NBFCs, and private equity funds, have also reported a more positive sentiment this quarter. Their score improved from 57 to 60 in Q2 2025, reflecting greater comfort with the quality of inventory being developed and a growing alignment between funding institutions and developers in terms of strategic market focus. Capital providers are showing increasing interest in structured funding opportunities, particularly in the premium residential and office space segments, which are demonstrating strong end-user demand and lower risk profiles.
Stakeholder Future Sentiment Score
Renewed Optimism Among Developers and Investors
Score >50: Optimism Score =50: Neutral/SameScore <50: Pessimism
Source: Knight Frank Research
Note: Non-Developers include banks, financial institutions and PE funds
Residential market outlook
Geographically, the rebound in sentiment is visible across all four regions of the country. The north zone, which had hit a post-COVID low of 48 in Q1 2025, recovered to a score of 55 in Q2 2025, buoyed by improving infrastructure connectivity, a resurgence in demand in Delhi-NCR, and a shift in developer focus toward premium inventory. The West zone saw an increase from 58 to 61, underpinned by continued strength in markets like Mumbai and Pune, which are seeing a consolidation of residential supply and sustained demand for office space. The South zone emerged as the strongest performer with a score of 63, up from 58, thanks to the commercial resilience of Bengaluru and Hyderabad and rising demand for lifestyle-led homes in key micro-markets. Meanwhile, the East zone held steady at 61, with Kolkata’s residential segment showing consistent mid-market activity and buyer confidence.
The survey also revealed that approximately 70% of stakeholders expect residential launches to either remain the same or increase in the coming months, showing a clear vote of confidence in the upper-end housing segments. The premium and luxury categories, particularly those priced above ₹10 million, continue to perform well. Developers are showing strategic maturity by focusing on select high-performing micro-markets. These launches are being curated carefully, aligning with specific buyer preferences, lifestyle expectations, and urban expansion trends. In contrast, developers remain measured when it comes to launching mid- and low-income housing projects, largely due to affordability headwinds and squeezed margins despite the use of incentives and financing schemes.
The sentiment around residential pricing is notably strong. In Q2 2025, 94% of stakeholders expected prices to remain stable or increase at par with the previous quarter. This expectation is supported by the robust pricing trends observed in markets like Bengaluru, NCR, and Chennai, where double-digit Y-o-Y price growth was recorded in H1 2025. Limited new supply in these cities, combined with a strong preference for lifestyle amenities and brand trust, is keeping prices elevated and stable. Sales sentiment has also slightly improved, with 52 percent of stakeholders expecting stable or increased residential sales over the next six months, compared to 50 percent in the previous quarter.
Residential Market Outlook
Premium Housing Demand Supports Market Stability
Hari Babu, President – NAREDCO, said, “The Q2 2025 Knight Frank NAREDCO Real Estate Sentiment Index reflects renewed optimism in the sector, with the Current Sentiment Score rising to 56 and Future Sentiment improving to 61. This recovery is led by steady office leasing—particularly by GCCs and flex operators—and strong demand for premium housing. Regionally, sentiment has picked up across the board, with the South leading at 63. Developers’ outlook has notably strengthened amid improved liquidity and lower borrowing costs. Backed by record GST collections, robust PMI, and monetary easing, India’s real estate sector appears well positioned for sustained growth through the rest of 2025.”
Office market outlook
In the commercial real estate space, the momentum remains strong, particularly in the office segment. Leasing activity continues to thrive, supported by sustained demand from sectors like Global Capability Centres (GCCs), Third-party IT firms, and flexible space operators. Around 80% of respondents in Q2 expect leasing volumes to either remain stable or increase. Although this is marginally lower than the 82% recorded in Q1, the demand fundamentals remain intact. Leasing activity is being increasingly driven by occupiers looking for quality spaces in Bengaluru, Hyderabad, and Pune, which continue to suffer from a supply-demand mismatch in Grade A properties.
New office supply expectations also remain steady. Around 66% of stakeholders believe supply will either remain at current levels or improve in the near term. Developers are prioritising high-performing residential projects and have taken a calibrated approach to office development, given the tight pipeline and existing demand levels. This strategy is also supporting rental trends, with 93% of stakeholders anticipating rents to remain stable or rise, up from 91% in Q1. The ongoing supply constraints, coupled with rising pre-commitments and enterprise expansion, are keeping rental growth robust across leading office markets.
Office Market Outlook
Office Market Sentiments Remains Resilient
Economic Scenario
Improved monetary policy conditions are also playing a key role in restoring stakeholder confidence. The RBI’s dovish stance, reflected in its 100-BPS rate cut in the first half of 2025, has significantly improved credit availability and reduced the cost of capital. As a result, funding sentiment has improved. In Q2, 90% of stakeholders said they expect capital access to remain stable or improve, compared to 79% in Q1. The number of stakeholders who expect an improvement in funding conditions rose to 40% this quarter, from 36% last quarter. This optimism is being driven by growing lender confidence in the premium residential and commercial segments, where asset quality and buyer intent remain strong. Lenders continue to remain cautious in the affordable housing segment due to thinner margins and elevated credit risk but,overall, liquidity conditions are showing a noticeable improvement.
At a broader economic level, India’s macroeconomic indicators are helping reinforce the positive mood in the real estate sector. GST collections touched a record high of ₹2.4 lakh crore in Q2, while manufacturing and services PMI readings continued to remain in expansionary territory. CPI inflation moderated to 3.2%, its lowest in six years, providing further headroom for consumption and investment. Infrastructure development remains a key policy focus, and the ongoing capital expenditure by the government is helping expand employment opportunities and urban demand. In this context, 70% of stakeholders said they expect India’s economic momentum to remain stable or improve, up from 55% in Q1.
Economic Scenario and Availability of Funding
Improved Liquidity Conditions Support Optimism
In conclusion, the Knight Frank-NAREDCO Real Estate Sentiment Index for Q2 2025 highlights a cautiously improving outlook, with both current and future scores rebounding after multiple quarters of decline. Residential markets are adjusting to shifting demand patterns, with high-ticket segments maintaining strength, while the office sector continues to outperform, led by strong GCC and Third-Party IT leasing. Monetary easing, robust economic indicators, and improved liquidity have supported this sentiment shift. Stakeholders are cautiously optimistic, realigning strategies to tap into evolving market opportunities. As structural fundamentals remain intact, India’s real estate sector is well-positioned to sustain its growth trajectory in the coming quarters, despite external uncertainties.
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