Indian Real Estate Stocks Plunge Amid Rising Oil Prices and Inflation Fears

Shares of leading Indian real estate companies, including Godrej Properties, DLF, Brigade Enterprises, and Lodha, have witnessed a decline of up to 4% today. The fall comes as concerns over the secondary impact of the ongoing US-Iran war continue to rise. Godrej Properties has emerged as the biggest loser on the Nifty Realty index with a 4% drop in today's session.

The US-Iran conflict has escalated with both sides attacking energy infrastructure overnight. This has affected gas production operations at the world's largest gas fields in Iran and Qatar. Neelkanth Mishra of Axis Securities warned about the second-order effects of this war on sectors beyond oil, including real estate. He said companies are facing delays due to supply chain disruptions caused by tile shortages.

Natural gas and propane are key input materials for tile production, a crucial component in real estate. The attack on gas infrastructure has already forced QatarEnergy, a major LNG producer and supplier, to declare Force Majeure at the start of the war. Reports indicate that the ceramic tile industry is facing a crisis due to this gas supply shortage.

Despite the ongoing conflict, some real estate companies have managed to weather short-term supply shocks. Prashin Jhobalia, CMO at House of Hiranandani, said their material sourcing has been planned well in advance and they are insulated from these disruptions. He also noted that while there are reports of material shortages in parts of the industry, their projects continue as scheduled.

Jhobalia expects an industry-wide impact from the ongoing conflict but believes it will be uneven. He said a prolonged geopolitical conflict could push up input costs and extend supply timelines. However, he also stressed that developers with strong balance sheets, disciplined procurement practices, and a long-term product focus will navigate these challenges better than those driven by short-term cycles.