A Conflict Far Away, A Market Close To Home

The Strait of Hormuz blockade since early March 2026 has begun to weigh heavily on the Indian real estate sector, pushing up material costs, delaying supplies, and raising the risk of project slowdowns or stoppages. Rerouted shipments are now taking 10–20 days longer and costing an additional Rs. 1.5 – Rs. 3.5 lakh per container, sharply increasing the overall cost of construction materials.

The old phrase about “interesting times” has a way of returning when least expected. For India’s real estate sector, 2026 has opened under precisely that shadow, shaped by forces far beyond its control, and unfolding far from its immediate geography. A conflict thousands of kilometres away in West Asia is beginning to weigh on construction sites in Mumbai, homebuyer sentiment in Bengaluru, and investment flows across Delhi-NCR. It is not the kind of disruption the sector typically prepares for. There are no policy warnings, no budget signals, no domestic triggers. And yet, its effects are now visible across balance sheets, project timelines, and buyer behaviour. More importantly, the impact is not immediate or singular. It arrives in layers, first through logistics, then through costs, then through sentiment. By the time it becomes visible to the average homebuyer, it has already moved through multiple systems, reshaping decisions in ways that are not always easy to trace back to their origin. “The proverbial Chinese curse ‘may you live in interesting times’ is becoming manifest on the Indian real estate construction sector in ways few developers would have foreseen as they rang in 2026,” says Dr. Prashant Thakur, Executive Director & Head - Research & Advisory, ANAROCK Group. “The Strait of Hormuz blockade since early March 2026 has hit the sector hard with exploding material costs, supply delays and potentially delayed and even stalled projects.” The Strait of Hormuz is not a place most homebuyers think about when signing a sale agreement. But in 2026, it has become impossible to ignore. What appears distant and abstract on a map has revealed itself as deeply embedded in the everyday mechanics of how Indian real estate is financed, built, and delivered. “Iran’s stranglehold on this critical waterway between the Persian Gulf and the Gulf of Oman has impacted a substantial amount of India’s shipping imports,” Thakur explains. Ships carrying construction materials are now being rerouted around the Cape of Good Hope, adding 10–20 days to shipping timelines and increasing costs by Rs. 1.5 – Rs. 3.5 lakh per container. For a sector that runs on tight timelines and finely balanced cost calculations, this is not a minor disruption. It is a slow-moving shock, one that does not arrive with a single jolt, but unfolds in layers, quietly altering the economics of construction across the country.


While India’s residential segment’s long-term fundamentals remain strong, the short-term tremors of the Iran War were clearly visible in the first quarter. The 7% dip in sales tracks the war-induced uncertainty, with sentiment and sales clearly affected by surging oil and construction prices - particularly in March. The decline also aligns with large numbers of prospective Middle Eastern homebuyers, who invest significantly in Indian real estate, hitting the pause button under the war cloud. Another key trend this quarter is that new launches have started outpacing sales, reversing the post-pandemic pattern when sales were usually higher. As a result, unsold inventory has increased 4% quarter-on-quarter and 7% year-on-year, with total stock across the top 7 cities now above 6 lakh units. Anuj Puri, Chairman, ANAROCK Group

THE INVISIBLE HAND OF SUPPLY CHAINS

Indian real estate has long depended on global supply chains more than it openly acknowledges. Steel, aluminium, crude-linked materials, high-end finishes, specialised fittings, many of the inputs that define modern construction travel across oceans before reaching a project site. That dependence is now under visible strain, and perhaps for the first time in recent memory, it is being discussed openly within the industry. “At a time when housing sales were already tapering, Indian developers are now confronted with an even starker landscape,” says Thakur. The sector, which had been navigating a gradual normalisation after the post-pandemic surge, now finds itself facing a new and less predictable layer of uncertainty. Even partial diplomatic relief has done little to ease the pressure. While some LPG tanker ships have been allowed passage through the Strait, bulk cargo continues to be rerouted.

These longer routes add between 6,000 and 10,000 nautical miles to journeys, significantly increasing transit time and fuel consumption. Marine fuel costs have climbed to nearly Rs. 1 lakh per tonne. On top of that come war-risk surcharges and sharply elevated insurance premiums, costs that are not absorbed at sea, but transmitted down the chain to developers and, eventually, to buyers. The situation has grown serious enough for Indian regulators to begin scrutinising shipping practices, particularly in cases of suspected profiteering. But even without excesses, the underlying economics have shifted. The cost of moving goods has risen, timelines have stretched, and predictability, arguably the most critical variable in construction has weakened. In an industry where delays can cascade into financing stress, regu latory penalties, and buyer dissat isfaction, this loss of predictability carries consequences that extend far beyond immediate cost increases.

CONSTRUCTION INPUTS UNDER PRESSURE
If the macro story begins in distant waters, its most immediate consequences are visible on the ground. Steel, the backbone of modern construction, has seen prices surge by nearly 20%, rising to around Rs. 72,000 per tonne from Rs. 62,000 earlier. For high-rise construction in cities like Mumbai, this translates to an added cost of approximately Rs. 50 per square foot. Steel is not a marginal input. It is the structural core of contemporary real estate, embedded in reinforced concrete, forming the skeleton of the buildings that define India’s urban landscape. Even modest fluctuations in its price ripple outward into overall project costs, financing requirements, and delivery timelines. The cost of hot rolled coil, another key material, now hovers between Rs. 51,000 and Rs. 56,000 per tonne and could rise further if disruptions persist. This has direct implications for both residential and commercial developments, particularly those dependent on high-volume structural inputs. Fuel adds another layer of pressure. Diesel powers cranes, mixers, transport vehicles, almost every aspect of construction activity. With Brent crude prices crossing $100 per barrel, operational costs have risen across the board, affecting projects in Mumbai, Delhi-NCR, Hyderabad, and other high-density urban centres. Aluminium, too, is under strain. Production disruptions in Bahrain and Qatar have pushed prices to around Rs. 3.5 lakh per tonne. For cities like Delhi, where facade heavy office parks rely heavily on aluminium-glass curtain walls, this has immediate consequences in the form of cost overruns, redesign considerations, and potential delays. Infrastructure projects are not immune. Bitumen, essential for road construction, has already risen to Rs. 48,000–51,000 per tonne, affecting large-scale projects such as expressways and urban connectivity corridors. What is unfolding is not a single point disruption, but a layered escalation—one that touches every stage of construction, from foundational materials to finishing elements. Developers are not dealing with one cost increase, but with multiple simultaneous pressures that compound over time.

LUXURY REAL ESTATE FEELS THE FIRST SHOCK
The earliest and most visible impact is being felt in the luxury segment, where reliance on imported materials is highest and expectations around quality leave little room for substitution. Italian Statuario and Calacatta marble, staples of ultra-luxury residences, now carry an additional Rs. 50 – Rs. 150 per square foot due to rerouting costs. Once installed, their cost approaches Rs. 6,000 per square foot, significantly higher than earlier benchmarks. Premium plotted developments and high-end apartments are also seeing cost increases in imported fittings, fixtures, and specialised design elements, many of which are sourced from Europe and West Asia. These increases come on top of an already rising cost base. Over the past four years, construction costs in cities like Mumbai and Delhi have risen by as much as 39%, averaging around Rs. 2,780 per square foot for mid-to-luxury skyscrapers. Labour adds another layer of complexity. Accounting for 25–35% of project costs, labour expenses have increased by 25–40% over the past four to five years, driven by regulatory changes, migration patterns, and broader economic shifts. For developers in the luxury segment, the challenge is not just managing costs, but doing so without compromising on quality, timelines, or brand positioning—each of which is critical in a segment where buyers are not merely purchasing a home, but an experience.

MUMBAI: THE EPICENTRE OF IMPACT
Nowhere are these pressures more concentrated than in Mumbai. The Mumbai Metropolitan Region, with more than 5,500 high-rises and over 300 towers, dominates India’s ultra-luxury housing market. In 2024 alone, homes priced above Rs. 40 crore saw transactions worth approximately Rs. 4,754 crore, with Mumbai accounting for nearly 88% of both volume and value. Micro-markets such as Worli have emerged as key hubs, logging over Rs. 5,500 crore in ultra-luxury apartment sales in just two years and accounting for roughly 40% of such transactions nationally. These markets are also among the most exposed to global supply chains. South Mumbai, BKC, Worli, and Lower Parel, centres of the city’s vertical expansion rely heavily on imported materials, advanced engineering inputs, and global design ecosystems. As a result, they are likely to experience the strongest impact of rising construction costs triggered by disruptions in the Strait of Hormuz. And yet, there is a paradox at play. Demand at the top end continues to hold steady. “It will probably not impact ultra-luxury sales,” Thakur notes. The resilience of this segment is tied to the nature of its buyers, high-net-worth individuals for whom real estate is often both an asset class and a store of wealth, relatively insulated from short term economic fluctuations.

The most immediate transmission channel is through energy prices. India imports nearly 85% of its crude oil requirement, making the sector highly sensitive to any supply disruption or price spike from the Middle East. As a result, there is emerging pressure on input costs such as steel, cement, and logistics, all of which are energy-linked. While this hasn’t translated into sharp price hikes yet, it is beginning to tighten developer margins and delay pricing decisions at the margin. Dr. Amit Goenka, Chairman & MD of Nisus Finance


TWO MARKETS, TWO REALITIES
The divergence between segments is becoming increasingly pronounced, almost to the point where they appear to operate as separate markets. For affordable and mid-income buyers, the pressures are immediate and deeply felt. Rising EMIs, persistent inflation, and limited wage growth are tightening household budgets. With the RBI maintaining its key rate at 5.25%, home loan interest rates range between 7.35% and 13.20%, constraining affordability. At the same time, rising fuel prices which are linked to global crude markets are pushing up the overall cost of living, leaving less room for large financial commitments like home purchases. In contrast, luxury buyers operate within a different economic framework. Even as developers anticipate price increases of over 5%, their target clientele has the capacity to absorb these hikes without significant strain. However, even this segment is not entirely immune. NRIs, particularly those based in the Gulf, account for a substantial share of high-end real estate transactions—between 15% and 22% in cities like Mumbai and Delhi. In some premium projects, developers estimate that NRIs contribute over 30% of total sales value. Disruptions in travel, flight availability, and broader regional uncertainty are beginning to slow decision-making within this group, introducing a layer of hesitation into an otherwise resilient segment.

THE NUMBERS REFLECT A PAUSE, NOT A COLLAPSE
The broader market reflects a shift in sentiment rather than a structural downturn. Housing sales across the top seven cities fell by 7% quarter-on quarter in Q1 2026. Approximately 1,01,675 units worth Rs. 1.51 lakh crore were sold during the quarter, compared to around 1,08,970 units worth Rs. 1.60 lakh crore in Q4 2025. The slowdown is visible, but not dramatic. It signals hesitation rather than retreat—a pause in decision making rather than a withdrawal from the market. Anuj Puri, Chairman, ANAROCK Group, attributes the dip to “war induced uncertainty,” particularly in March, when rising oil prices and geopolitical tensions began to weigh on buyer sentiment. At the same time, new launches have begun to outpace sales, reversing a trend seen in the immediate post-pandemic years. As a result, unsold inventory has risen by 4% quarter-on-quarter and 7% year on-year, crossing 6 lakh units across the top seven cities. City-level trends add further nuance. Mumbai Metropolitan Region and Bengaluru together accounted for nearly 48% of total sales during the quarter. Chennai recorded the sharpest quarterly decline at 18%, but also posted the highest annual growth at 31%. New supply grew modestly by 2% quarter-on-quarter but rose significantly on an annual basis. Hyderabad led with a 46% increase in new launches, while Chennai, NCR, Kolkata, and Pune saw declines in supply. On an annual basis, however, the market remains stable. Compared to Q1 2025, housing sales have risen by approximately 7%, suggesting that long-term demand fundamentals remain intact even as short-term sentiment fluctuates.

SENTIMENT, CAPITAL, AND CAUTION
If the data reflects hesitation, capital flows reveal a more layered story. “At this stage, the impact is more sentiment-driven than structural,” says Dr. Amit Goenka, Chairman & MD of Nisus Finance. The slowdown in sales reflects a temporary pause in buyer activity rather than a fundamental shift in demand. However, caution is visible among high-net-worth individuals and NRIs, particularly those linked to the Gulf corridor. Foreign investment into Indian real estate fell by 16% in 2025 and saw a sharp decline of approximately 75% in Q1 2026. At the same time, domestic institutional capital is stepping in. Investment reached a record $10.4 billion in 2025, providing a stabilising counterweight. India’s broader economic outlook continues to support confidence. With GDP growth projected at around 6.5%, the country remains relatively insulated compared to more volatile global markets. Yet, the immediate pressure is unmistakable. India imports nearly 85% of its crude oil requirements, making it highly sensitive to global price movements. Rising energy costs are pushing up input prices across steel, cement, and logistics, tightening developer margins and influencing pricing strategies.

HOW DEVELOPERS ARE RESPONDING ON THE GROUND
On the ground, developers are adjusting in real time, balancing caution with continuity. Umesh Gowda H.A, Chairman and Founder, Sanjeevini Group, emphasises cost management. “The need of the hour is to proactively optimise costs without increasing prices for end-users,” he says. The focus is on efficiency, reworking procurement strategies, renegotiating supplier contracts, and improving execution timelines to offset rising costs wherever possible. The industry has navigated similar cycles before, and there is a conscious effort to maintain delivery schedules while absorbing short term shocks. In premium markets, the challenge is more nuanced. Ankur Jalan, CEO of Golden Growth Fund, highlights rising labour 19 costs, delayed material deliveries, and currency fluctuations as key concerns. Developers in markets such as South Delhi are recalibrating pricing strategies, seeking to balance increased costs with the need to maintain quality and delivery commitments. Despite these pressures, demand, particularly in the high end segment remains resilient, supported by strong underlying fundamentals and a relatively inelastic buyer base.

Viewing the current geopolitical cycle as a zero-sum game misreads how global enterprises deploy capital today. We are witnessing that the real estate market is not a regional displacement, but a strategic recalibration. While geopolitical tensions have caused a sentiment adjustment and some investors have stepped back, capital has not vanished. It is redirecting, and increasingly, it is finding its way to India. Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE

DUBAI: A MIRROR TO THE MOMENT
Across the Arabian Sea, Dubai offers a parallel narrative—one shaped by the same geopolitical tensions, but unfolding under different market conditions. The emirate entered 2026 from a position of strength. In 2025, it recorded nearly AED 917 billion (approximately $250 billion) in real estate transactions, with volumes exceeding 270,000 deals. Residential property prices have risen by 60–75% since 2021, driven by sustained global demand and investor confidence. In this context, the current moment is not one of panic, but recalibration. “Right now, the sentiment in Dubai is less about concern and more about a rational pause,” says Mamtu Mirchandani. “Investors are not stepping away. They are simply taking a moment to gain clarity before making decisions.” Luxury and high-value segments continue to demonstrate resilience, supported by liquidity and a high share of cash transactions. For many investors, the instinct is not to withdraw, but to wait. That sense of steadiness is echoed from within the region itself. Rizwan Sajan, Founder and Chairman, Danube Group, who has spent over three decades in Dubai, frames the moment with a longer view. “For over three decades, Dubai has been my home, and I will always stand by this extraordinary city. While no place in the world is perfect, even in challenging times like these, we continue to feel safe and secure in Dubai,” he says. “We have overcome crises before, from the 2008 financial downturn to COVID and have emerged stronger each time. Resilience is embedded in Dubai’s DNA, and I am confident that our economy will continue to grow and thrive.” Even in real estate, he cautions against reading too much into short-term shifts. “At this stage, the impact appears to be driven more by sentiment than by any fundamental structural shift. It would be premature to draw any long-term conclusions.” That distinction between sentiment and structure is not limited to Dubai, it is shaping how capital is behaving across markets.

CAPITAL DOES NOT DISAPPEAR, IT MOVES
In times of uncertainty, capital rarely disappears. It shifts, often quietly, towards markets that offer stability, scale, and long-term potential. Anshuman Magazine, Chairman & CEO (India, Southeast Asia, Middle East & Africa), CBRE, sees this as a strategic recalibration rather than a disruption. As global enterprises reassess risk, India is capturing a larger share of investment, particularly through the expansion of Global Capability Centres. This shift reflects a deeper structural realignment. India is no longer seen merely as an outsourcing destination, but as a core hub for innovation, digital infrastructure, and complex operations. At the same time, the India Dubai corridor continues to deepen, with Indian corporates using Dubai as a gateway to global markets even as global capital flows into India.

A YEAR ALREADY MARKED
Even if the conflict were to ease tomorrow, its aftereffects will not disappear overnight. Shipping delays, freight surcharges, and higher insurance costs are likely to linger, slowing the steady rhythm that construction depends on. Port backlogs will continue to hold up key materials, pushing timelines off course and forcing developers to constantly readjust. “We can expect a 2–8 week period for tanker pileups to clear,” says Thakur. “A full reset will take anywhere between one to three months.” In an industry where timing is everything, these delays are not minor setbacks. They ripple across projects, affecting labour schedules, financing cycles, and delivery commitments. In a year already shaped by tight timelines and seasonal constraints, even small disruptions can compound quickly. As Thakur puts it, “Much of the damage to 2026 is, so to say, cast in steel and concrete.” Yet, the larger impact may lie beyond immediate delays and rising costs. The crisis has exposed how dependent the sector remains on global supply chains, dependencies that have long been taken for granted. What once seemed efficient now appears fragile. For Indian real estate, this is more than a moment of strain. It is a moment of reassessment. Developers are being pushed to think harder about sourcing, risk, and resilience, questions that will likely shape decisions well beyond this year. Because in the end, this isn’t just a story about a conflict far away. It’s about how those distances collapse into costs, into delays, and eventually into the very foundations of what gets built.