Gulf War Escalates Cost Pressures on Indian Real Estate Sector

The Indian real estate sector is beginning to feel the impact of the US-Israel and Iran conflict in the Gulf region, with key raw materials becoming costlier or scarce, says Parveen Jain, president of the National Real Estate Development Council (NAREDCO).

The ceramic units in Gujarat and other states have closed down due to fuel unavailability. This will definitely have an impact on the construction industry. Similarly, costs of several other materials are going up. There is a change in steel prices, and all PVC items, wires, and pipes are becoming costlier. Pricing pressure is there on glass items. If the war prolongs, it is going to have a major impact on the industry, Jain emphasized.

In an interaction with Fortune India, Jain noted that the real estate sector was expecting to benefit from a friendly Union Budget, which prioritized affordable housing and the development of tier II and III cities. However, the war has started to slow down these initiatives. Jain also highlighted the escalation of land costs as another impediment to the faster rollout of affordable housing projects.

In metro cities, land prices have gone up sharply in the last 3-4 years. Properties, apartments, and other real estate assets have all become costlier. Buyers will hesitate if they find a significant price difference in a short period, but the reality is that land and material costs have all increased, Jain explained.

Jain acknowledged that the government has done a lot of work in the area of affordable housing in the last couple of years. There is demand, but land cost is what is slowing down its growth, he added. We are also having discussions with the government to change the policy to take care of the land cost. Either the government can provide land or develop affordable housing projects in a Public-Private Partnership (PPP) mode, he suggested.

Jain also pointed out that the Real Estate (Regulation and Development) Act, 2016 (RERA) has cleaned up the sector to a large extent, increasing transparency and building confidence among serious buyers. NAREDCO is an apex Indian real estate industry body established under the Ministry of Housing and Urban Affairs. It acts as a legitimate platform for the government, real estate industry, and the general public to address their concerns and find effective solutions to the challenges faced by the real estate sector.