Strait of Hormuz Crisis: Impact on South Mumbai Real Estate Prices

According to a report by ANAROCK Group, the shipping routes for construction materials have been significantly impacted, forcing vessels to detour around the Cape of Good Hope. The rerouting of ships carrying construction materials has added 10–20 days to transit times and increased costs by Rs 1.5–3.5 lakh per container.

Mumbai Metropolitan Region (MMR) is expected to bear the brunt of the cost pressures due to the Hormuz crisis.

The ongoing blockade of the Strait of Hormuz is starting to have a ripple effect on the Indian real estate market, as builders, especially in Mumbai, are facing increased costs and delays in the supply of materials, which may even affect the execution of projects. As per a report by ANAROCK Group, the shipping of construction materials has been greatly affected, and vessels are being diverted via the Cape of Good Hope, which has added 10–20 days to transit times and increased costs by Rs 1.5–3.5 lakh per container.

Dr Prashant Thakur, Executive Director & Head - Research & Advisory, ANAROCK Group, said, 'Iran’s stranglehold on this critical waterway between the Persian Gulf and the Gulf of Oman has impacted a substantial amount of India’s shipping imports. The forced reroutes of ships carrying construction materials around the Cape of Good Hope has added anywhere between 10-20 days to shipping times and as much as Rs 1.5-3.5 lakh per container to the costs.'

Input costs have surged amid the Hormuz crisis and Middle East tensions. Steel prices have surged nearly 20 per cent to around Rs 72,000 per tonne, up from Rs 62,000 earlier. This alone is estimated to increase high-rise construction costs in Mumbai by about Rs 50 per sq ft. Aluminium prices have also climbed sharply to approximately Rs 3.5 lakh per tonne amid supply disruptions in Gulf countries. Bitumen prices have remained high at around Rs 48,000-Rs 51,000 per tonne, while imported luxury material such as Italian marble has seen a rise of around Rs 50-Rs 150 per sq ft due to rerouting costs.

Overall, the cost of construction in cities such as Mumbai and Delhi has already risen by around 39 per cent in the last four years and is now averaging at around Rs 2,780 per sq ft for mid-to-luxury projects. Labour costs have risen by around 25-40 per cent due to a shortage of skilled workers.

Mumbai Metropolitan Region (MMR), India’s largest luxury housing market, is expected to bear the brunt of these cost pressures. The region currently has over 10,000 luxury units under construction. India registered 59 ultra-luxury home sales in the year 2024, with a value of approximately Rs 4,754 crore. Out of these sales, nearly 88 per cent of the volume and value were from Mumbai. Worli, Lower Parel, BKC, and South Mumbai are the prominent micro-markets in this segment. While developers may raise prices by over 5 per cent to offset higher costs, the demand in the ultra-luxury segment is expected to remain relatively robust because of the high purchasing power of the buyers.

Non-resident Indians (NRIs), who contribute 15–22 per cent of high-end housing demand—and up to 30 per cent of total sales value in premium projects—are also facing challenges. Travel disruptions and flight delays linked to the Gulf crisis may slow decision-making and deal closures. Meanwhile, elevated oil prices are feeding into broader inflation, limiting the scope for interest rate cuts. Home loan rates remain between 7.35 per cent and 13.20 per cent, continuing to weigh on demand in the affordable and mid-income segments.

Experts caution that even if the geopolitical situation stabilises soon, the sector will not see immediate relief. Port congestion, tanker backlogs, and increased freight contracts may take 1-3 months to stabilise. Developers might also miss some critical construction deadlines, including the critical window of the monsoon season. In a strained supply chain, the crisis is also likely to result in a greater need to source construction materials locally, thus lessening the impact of global supply chains.

For now, the crisis at Hormuz is set to make the already pricey residences in South Mumbai even more so, as construction costs would be impacted and could result in a hike in luxury residences.