Since the reference to Spirit is literal there is no reason to assume the reference to water is not literal as well. And as mentioned, scripture confirms the NT conversion involves both literal water and Spirit. (Acts 2:2, 36-41, 8:12-18, 9:17-18, 10:43-48, 19:1-7, 22:16)Have you considered that water in John 3 is a reference to the word of God given what 1 Peter 1:23 says?