Real Estate Stocks Plunge Amid US-Iran Conflict Concerns

Shares of Indian real estate companies, including Godrej Properties, DLF, Brigade Enterprises, and Lodha, are trading with losses of up to 4% on Thursday, March 19. The primary concern driving this decline is the secondary impact of the US-Iran conflict, which is now affecting sectors beyond just oil sensitives.

Godrej Properties is the top loser on the Nifty Realty index, down 4% in today's session, followed by Brigade Enterprises, DLF, and Sobha, which are down between 3% to 4%.

The war between the US and Iran has escalated after both parties attacked energy infrastructure overnight, impacting gas production operations at the world's largest gas fields in Iran and Qatar. Neelkanth Mishra of Axis Securities highlighted the second-order effects of the ongoing conflict, particularly on the real estate sector, during an interaction with CNBC-TV18.

“There are second-order effects showing up. So, we now have real estate companies wanting to write to RERA that projects are going to get delayed because tile supply is stuck. There are retail companies which are slowing down their store expansions because tiles are not available. There are auto component companies which are struggling to get carbon black. There are issues with LNG supply in certain parts of auto manufacturing which can actually start affecting auto production. So, the second-order effects of this, and remember, there's going to be a global impact of this,” Mishra said.

Natural gas and propane are critical components in tile manufacturing, accounting for 20% to 35% of the total production cost. The attack on gas infrastructure has already prompted QatarEnergy, one of the largest producers and suppliers of LNG, to declare Force Majeure, right at the start of the war in early March. Reports suggest that the ceramic tile industry is facing a crisis due to the shortage of gas supply.

While real estate companies have not yet quantified or highlighted any potential impact on operations due to the war, Prashin Jhobalia, Chief Marketing Officer at House of Hiranandani, told CNBC-TV18 that the sourcing of their material has been planned well in advance, insulating them from short-term supply shocks. “While there are reports of material shortages in parts of the industry, our projects continue to move as scheduled,” he added.

For an industry-wide impact, Jhobalia expects the impact to be uneven. “A prolonged geopolitical conflict could push up input costs and extend supply timelines, but the impact will be uneven. Developers with strong balance sheets, disciplined procurement, and a long-term product focus will navigate this far better than those driven by short-term cycles. The market is resilient—and phases like these tend to reward quality-led players,” he added.

The Realty index is now down 10% for the month, led lower by shares of Signatureglobal India, which is down 21%, and Lodha Developers, which is down 16% this month. In fact, shares of Lodha are at a 52-week low. Shares of DLF, Sobha, Godrej Properties are also down between 9% to 10% for the month so far.