Rising Oil Prices From West Asia Conflict Hit India’s Property Market
The conflict in West Asia is emerging as a fresh variable for India's real estate sector at a time when the market has been benefiting from steady demand, easing inflation and expectations of a softer interest-rate environment. Any prolonged disruption that keeps energy prices elevated could ripple through the housing value chain, affecting construction costs, developer profitability and homebuyer affordability.Beyond rising input costs, the implications could extend to borrowing rates, investment sentiment and demand across key housing segments. As developers navigate cost pressures and buyers contend with affordability concerns, the sector is closely watching whether global developments begin to influence the momentum built over the past few years.
Oil Shock Reaches Realty
India imports more than 85 per cent of its crude oil requirement, making the property sector vulnerable to energy-price shocks. Between February and April 2026, cement prices rose from Rs 333 to Rs 348 per bag, while HRC steel prices increased nearly 7 per cent, signalling rising cost pressures across the construction value chain.
Aniket Dani, Director, Crisil Intelligence, said the impact of higher crude oil prices was becoming increasingly visible across construction materials and logistics, adding that “the impact on construction costs is becoming more visible, although it remains manageable at present.”
While the cost escalation remains manageable for now, Dani said a prolonged increase in input prices could eventually translate into selective housing price increases, particularly in premium and supply-constrained markets, where "developers currently have some cushion through operational efficiencies and procurement discipline.”
Cost Inflation Challenges Developers
Raw materials account for nearly 60 per cent of total construction costs, with steel and cement alone contributing around 35-40 per cent. Industry assessments indicate that overall construction costs could rise by 3-8 per cent if commodity inflation and supply-chain disruptions persist.
Prolonged commodity inflation could weigh on developer profitability, with "such pressures may reduce developer operating margins by 100-500 basis points", Rajeev Juneja, President, PHDCCI, said, depending on the duration of the commodity cycle and the extent of supply-chain disruptions.
The ability to pass on higher costs will vary across housing segments, Juneja noted, adding that "developers may not be able to fully transfer the burden" in affordable and mid-income projects where buyers remain highly sensitive to EMI outgo.
Housing Demand At Risk
India's residential market recorded housing sales worth over Rs 6–8 lakh crore across major cities in 2025, supported by easing inflation and expectations of lower borrowing costs. However, elevated crude oil prices could keep inflationary pressures intact and delay the interest-rate easing cycle.
The ongoing conflict in West Asia is likely to keep crude prices elevated in the near term, with "the impact is likely to be seen across all economic sectors including real estate," Vimal Nadar, National Director and Head of Research, Colliers India, said, noting that rising inflation could eventually influence credit costs and consumption levels.
Persistent inflationary pressures could affect the trajectory of interest rates, Nadar said, adding that home loan rates could move closer to 9 per cent and "affect overall housing affordability, especially in the affordable and middle-income segments.”
Can NRIs Offset The Slowdown?
Gulf nations contribute a significant share of India's remittances, which touched a record USD 136 billion in FY25. Cities such as Kochi, Hyderabad, Mumbai and Delhi-NCR have seen strong NRI participation in premium and luxury housing, making the segment sensitive to shifts in economic activity across West Asia.
A prolonged slowdown in the region could lead to some moderation in overseas investments, Dani said, noting that "luxury and premium projects attract a relatively higher share of overseas buyers." However, he maintained that domestic end-user demand remains the primary driver of the residential market and any uncertainty is more likely to result in deferred purchases than a sharp pullback.
The outlook may not be uniformly negative, with Nadar pointing to factors that could continue supporting overseas demand. A depreciating rupee coupled with favourable homebuying sentiment among overseas Indians could create ‘fresh opportunities’ for investors, he said, adding that "a depreciating Rupee coupled with benign homebuying sentiments in the Middle East can create opportunities for NRI investors". Such demand could continue to support luxury housing across select Tier-I markets and partly offset any moderation in affordable and middle-income segments.
Near-Term Headwinds Persist
India's residential market has maintained strong momentum over the past few years, supported by urbanisation, infrastructure expansion and improving homeownership aspirations. Ongoing developments across international markets could influence the sector's growth trajectory in the months ahead.
Juneja said higher oil prices could complicate the Reserve Bank of India's monetary policy outlook and place additional pressure on the rupee, adding that "housing may see some contraction in the short term" if borrowing costs remain elevated and affordability weakens across key housing segments.
Despite the near-term risks, "the long-term outlook for Indian housing growth remains intact", Juneja noted, citing structural drivers such as urbanisation, infrastructure expansion and sustained end-user demand that continue to support the sector's fundamentals.
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