FreepikNavigating the impact of geopolitical conflicts on Indian real estate
Rising development costs, shifting investor sentiment and evolving capital flows are reshaping the country’s property sector
March 31, 2026Real Estate
Written by:Isabella Toledo
Key Takeaways
- The ongoing Middle East conflict has triggered energy price fluctuations, leading to a weaker rupee and significant capital outflows, impacting India’s real estate market.
- Global investors are adopting a "wait and watch" approach, with a preference for de-risked assets such as data centres and REITs, while residential land acquisitions have slowed.
- Escalating fuel, logistics, and material costs are driving up project expenses, but mid-premium and premium segments thrive from NRI demand despite lower sales volumes.
The ongoing geopolitical turbulence, particularly the conflict in the Middle East, has significantly influenced the global economic landscape, and India’s real estate sector is no exception.
During the GRI Institute's virtual roundtable, Macroeconomic Impact of Geopolitical Conflicts on Indian Real Estate, senior industry executives gathered to discuss the influence of the situation on energy prices, its impact on capital flows, as well as how rising development costs and shifting investor sentiment are reshaping the country’s evolving market.
A primary driver of this volatility is the restriction of the Strait of Hormuz, a critical maritime corridor responsible for one-third of global oil transit. With India and China receiving nearly 40% of this supply, the resulting energy price fluctuations have put significant pressure on the domestic economy.
This macroeconomic environment has led to the depreciation of the rupee - from INR 88 to approximately INR 93 against the dollar - and substantial capital outflows from equity markets, with the Nifty index experiencing a 15% decline since the beginning of the year.
The country’s neutral geopolitical stance and emerging status as a global manufacturing hub continue to position it as a stable alternative to other global economies.
In this context, investor behaviour is increasingly focused on quality, with a clear preference for stable, de-risked assets such as data centres, warehousing, and logistics parks - which are perceived as more resilient to IT-sector volatility or AI-related disruptions.
This trend is further reflected in the strong performance of Real Estate Investment Trusts (REITs), which offer stable earnings visibility and long-term lease stability. In contrast, discussions surrounding residential land acquisitions have slowed as investors seek greater clarity on currency depreciation and interest rate projections.
Despite recent currency pressures necessitating a recalibration of IRR expectations, institutional interest remains historically high, with capital seeing a significant shift from North American and Canadian funding towards Middle Eastern and Japanese investors.
The latter, in particular, has become a critical player, as their investment framework prioritises sovereign and sector risk comfort above immediate commercial returns, demonstrating a willingness to take equity risks in partnership with reputable domestic counterparties.
Essential materials such as steel and PVC, which are heavily linked to petroleum products, have seen immediate pricing surges. Experts suggest that if the conflict persists, total project costs could rise between 3% and 10%.
Moreover, the unpredictable nature of geopolitical conflicts means that timelines for project delivery are becoming more fluid. Disciplined developers are prioritising the fast-tracking of projects to reduce finance cost burdens and meet delivery timelines to maintain consumer trust.
While some developers have attempted to pass these costs on to customers following price increases last year, the market’s sensitivity to price hikes means that many developers are being forced to absorb some of these increases themselves using strategic procurement methods - such as locking in steel prices in advance to cushion financial impacts.
While the volume of units sold across the top seven cities decreased by approximately 16% between 2024 and 2025, the overall value of the sector grew as pricing rose by 17% and apartment sizes increased - indicating that the mid-premium and premium segments are currently the healthiest, often taking market share from both affordable and luxury segments.
Interestingly, non-resident Indians (NRIs) have continued to play a significant role in sustaining demand, acting as a stabilising force in certain markets. The ongoing uncertainty has, in fact, led to an uptick in demand from this group, who view India as a safer, long-term investment destination amidst global volatility.
As the nation moves towards the objectives of the Viksit Bharat (Developed India) 2047 initiative, the real estate sector is poised to benefit from a decadal tailwind. To capitalise on this momentum, developers must remain agile and continue to sharpen their value propositions in an increasingly complex global environment.
Thank you to everyone who participated in GRI Institute's virtual roundtable Macroeconomic Impact of Geopolitical Conflicts on Indian Real Estate, moderated by Shobhit Agarwal (ANAROCK Capital) and expert insights by Abhishek Anand (Kotak Investment Banking), Amit Sinha (Mahindra Lifespace Developers Ltd.), Manish Meena (Nisus Finance) and Neeraj Bansal (KPMG India).
During the GRI Institute's virtual roundtable, Macroeconomic Impact of Geopolitical Conflicts on Indian Real Estate, senior industry executives gathered to discuss the influence of the situation on energy prices, its impact on capital flows, as well as how rising development costs and shifting investor sentiment are reshaping the country’s evolving market.
Understanding the bigger picture
While India’s real estate sector remains one of the most resilient globally, the current geopolitical tensions are making their presence felt. The US/Israel-Iran conflict has evolved beyond a temporary disruption into a phase of extended uncertainty for global markets.A primary driver of this volatility is the restriction of the Strait of Hormuz, a critical maritime corridor responsible for one-third of global oil transit. With India and China receiving nearly 40% of this supply, the resulting energy price fluctuations have put significant pressure on the domestic economy.
This macroeconomic environment has led to the depreciation of the rupee - from INR 88 to approximately INR 93 against the dollar - and substantial capital outflows from equity markets, with the Nifty index experiencing a 15% decline since the beginning of the year.
Capital inflows and investor sentiment
Global investor sentiment is currently characterised by a "wait and watch" approach - although Indian real estate stocks have seen a notable decline, this is largely viewed as a temporary reaction, with strong confidence in India’s long-term growth trajectory.The country’s neutral geopolitical stance and emerging status as a global manufacturing hub continue to position it as a stable alternative to other global economies.
In this context, investor behaviour is increasingly focused on quality, with a clear preference for stable, de-risked assets such as data centres, warehousing, and logistics parks - which are perceived as more resilient to IT-sector volatility or AI-related disruptions.
This trend is further reflected in the strong performance of Real Estate Investment Trusts (REITs), which offer stable earnings visibility and long-term lease stability. In contrast, discussions surrounding residential land acquisitions have slowed as investors seek greater clarity on currency depreciation and interest rate projections.
Despite recent currency pressures necessitating a recalibration of IRR expectations, institutional interest remains historically high, with capital seeing a significant shift from North American and Canadian funding towards Middle Eastern and Japanese investors.
The latter, in particular, has become a critical player, as their investment framework prioritises sovereign and sector risk comfort above immediate commercial returns, demonstrating a willingness to take equity risks in partnership with reputable domestic counterparties.
Rising costs and supply delays
On the supply side, the industry is grappling with escalating development costs driven by higher fuel and logistics prices.Essential materials such as steel and PVC, which are heavily linked to petroleum products, have seen immediate pricing surges. Experts suggest that if the conflict persists, total project costs could rise between 3% and 10%.
Moreover, the unpredictable nature of geopolitical conflicts means that timelines for project delivery are becoming more fluid. Disciplined developers are prioritising the fast-tracking of projects to reduce finance cost burdens and meet delivery timelines to maintain consumer trust.
While some developers have attempted to pass these costs on to customers following price increases last year, the market’s sensitivity to price hikes means that many developers are being forced to absorb some of these increases themselves using strategic procurement methods - such as locking in steel prices in advance to cushion financial impacts.
Demand-side pressures
The demand side of the equation remains active, but is undergoing visible transitions.While the volume of units sold across the top seven cities decreased by approximately 16% between 2024 and 2025, the overall value of the sector grew as pricing rose by 17% and apartment sizes increased - indicating that the mid-premium and premium segments are currently the healthiest, often taking market share from both affordable and luxury segments.
Interestingly, non-resident Indians (NRIs) have continued to play a significant role in sustaining demand, acting as a stabilising force in certain markets. The ongoing uncertainty has, in fact, led to an uptick in demand from this group, who view India as a safer, long-term investment destination amidst global volatility.
How to manage uncertainty
Industry leaders agree that India remains the "best house in a difficult street." While rising interest rates and inflation present short-term hurdles, the foundation of the market is solid, bolstered by cleaner balance sheets, RERA-led discipline, and significant government infrastructure spending.As the nation moves towards the objectives of the Viksit Bharat (Developed India) 2047 initiative, the real estate sector is poised to benefit from a decadal tailwind. To capitalise on this momentum, developers must remain agile and continue to sharpen their value propositions in an increasingly complex global environment.
Thank you to everyone who participated in GRI Institute's virtual roundtable Macroeconomic Impact of Geopolitical Conflicts on Indian Real Estate, moderated by Shobhit Agarwal (ANAROCK Capital) and expert insights by Abhishek Anand (Kotak Investment Banking), Amit Sinha (Mahindra Lifespace Developers Ltd.), Manish Meena (Nisus Finance) and Neeraj Bansal (KPMG India).