At a time when the market has benefited from consistent demand, declining inflation, and predictions of a lower interest-rate environment, the conflict in West Asia is emerging as a new variable for India’s real estate sector. Construction costs, developer profits, and homebuyer affordability might all be impacted by any protracted disruption that keeps energy prices high.
The consequences could affect borrowing rates, investment attitude, and demand in important housing segments in addition to increased input costs. The industry is keenly monitoring whether global developments start to impact the momentum created over the previous few years as developers manage cost challenges and purchasers deal with concerns about affordability.
Oil Shock Reaches Realty
Since over 85% of India’s crude oil needs are met by imports, the country’s real estate market is susceptible to changes in energy prices. Cement prices grew from Rs 333 to Rs 348 a bag between February and April 2026, and HRC steel prices rose by over 7%, indicating growing cost pressures throughout the construction value chain.
The impact of rising crude oil prices on building supplies and logistics is becoming more apparent, according to Aniket Dani, Director of Crisil Intelligence. He said that “the impact on construction costs is becoming more visible, although it remains manageable at present.”
In premium and supply-constrained markets, where “developers currently have some cushion through operational efficiencies and procurement discipline,” a sustained increase in input prices could eventually result in selective housing price increases, even though the cost escalation is currently manageable, according to Dani.
Cost Inflation Challenges Developers
Steel and cement alone account for about 35–40% of building expenditures, with raw materials making up about 60% of the total. According to industry assessments, if supply-chain disruptions and commodity inflation continue, overall construction costs might increase by 3–8%.
According to Rajeev Juneja, President of PHDCCI, “such pressures may reduce developer operating margins by 100-500 basis points.” Depending on the length of the commodity cycle and the degree of supply-chain disruptions, prolonged commodity inflation might have a negative impact on developer profitability.
According to Juneja, “developers may not be able to fully transfer the burden” in cheap and mid-income projects where customers are still extremely sensitive to EMI outgo. The ability to pass on greater expenses would differ between housing segments.
Housing Demand At Risk
In 2025, house sales in India’s major cities totaled around Rs 6–8 lakh crore, helped by declining inflation and anticipated lower financing costs. High crude oil prices, however, may prolong the cycle of interest rate easing and maintain inflationary pressures.
Vimal Nadar, National Director and Head of Research at Colliers India, stated that the ongoing conflict in West Asia is likely to keep crude prices high in the near future. “The impact is likely to be seen across all economic sectors including real estate,” he added, adding that rising inflation may eventually affect credit costs and consumption levels.
According to Nadar, the trajectory of interest rates may be impacted by ongoing inflationary pressures. He added that home loan rates may approach 9% and “affect overall housing affordability, especially in the affordable and middle-income segments.”
Can NRIs Offset the Slowdown?
A substantial portion of India’s remittances, which reached a record USD 136 billion in FY25, come from Gulf countries. Strong NRI participation in premium and luxury property has been observed in cities like Kochi, Hyderabad, Mumbai, and Delhi-NCR, making the market vulnerable to changes in West Asian economic activity.
According to Dani, “luxury and premium projects attract a relatively higher share of overseas buyers,” therefore a protracted slowdown in the region would cause some slowing in foreign investments. He insisted, however, that domestic end-user demand continues to be the driving force behind the home market and that any uncertainty is more likely to cause postponed purchases than a dramatic decline.
Nadar identifies elements that could sustain demand abroad, suggesting that the future may not be entirely bleak. He added that “a depreciating rupee coupled with benign homebuying sentiments in the Middle East can create opportunities for NRI investors” and that “fresh opportunities” for investors could be created by a declining rupee and favorable homebuying mood among Indians living abroad.
Any deceleration in the inexpensive and middle-income segments may be partially offset by this demand, which could sustain luxury housing in some Tier-I cities.
Near-Term Headwinds Persist
Over the past few years, India’s residential market has continued to grow rapidly thanks to infrastructure development, urbanization, and rising desires for homeownership. In the coming months, the sector’s growth trajectory may be impacted by ongoing changes in overseas markets.
Juneja added that “housing may see some contraction in the short term” if borrowing costs stay high and affordability declines across important housing categories, adding that increased oil prices might complicate the Reserve Bank of India’s monetary policy stance and put further pressure on the rupee.
Juneja stated that “the long-term outlook for Indian housing growth remains intact” despite the short-term difficulties, pointing to structural factors like urbanization, infrastructural expansion, and persistent end-user demand that sustain the foundations of the industry.
