Crude oil shock may squeeze affordable housing but premium homes stay resilient
Amid geopolitical uncertainties, India's real estate sector shows promising strength. A robust demand alongside improved developer finances is likely to mitigate immediate pressures. The luxury housing segment is expected to stay stable despite affordability hurdles, while both office leasing and industrial warehousing are anticipated to flourish. Continued institutional investment bodes well for…
India's real estate market is anticipated to maintain overall stability despite geopolitical tensions from the West Asia crisis, according to a CareEdge Ratings report. Both steady demand and strengthened developer finances are expected to offset near-term challenges. However, sustained high crude oil prices may increase construction costs by 2-3%, potentially impacting affordable housing and deeply indebted developers.
Premium housing is projected to remain stable, driven by affluent domestic buyers and non-resident Indians. Residential sales in the top six cities are forecast to hover around 3.55 lakh units for the fiscal year 2026. The market is also witnessing a gradual trend towards premiumization, with 53% of new launches priced above Rs 1.5 crore in Q1 2026, up from 43% a year prior.
On the flip side, the share of homes under Rs 1.5 crore has dropped to 47% from 57% during the same period. The surge in construction costs and inflation may further strain affordability, especially for low- and middle-income buyers. Developers entering the uncertain period with healthier balance sheets could provide a buffer against short-term volatility.
The office segment is expected to remain a significant growth driver, with Grade A office absorption across the top six cities projected to exceed 90 million square feet by fiscal year 2026. Institutional investment in the sector has remained robust, with $3.5-4 billion inflow in the first half of 2026, the highest since the pandemic.
Nevertheless, the outlook remains contingent on crude oil price trends; prolonged high energy costs could tighten developer margins and dampen affordability, particularly in the mass housing segment. Overall, CareEdge maintains that the sector's strong underlying demand, improved developer finances, and resilient commercial real estate market should help buffer much of the near-term impact of the West Asia crisis.
Written by urgent.news from Times of India's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
