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The increasing conflict in the Middle East is starting to put cost pressure on India's real estate sector. Prices of construction materials are rising and major industry leaders are warning that if the conflict continues till April, construction costs could increase by up to 5 percent. If this conflict prolongs, the construction schedule is also likely to be affected due to shortage of construction materials and resources. Ambuja Neotia Group Chairman Harshvardhan Neotia said the crisis is triggering a “classic cost-push cycle” for real estate.

Crude oil prices were below $70 per barrel in February, which increased to well above $110-120 per barrel in March, and natural gas prices have also seen a huge jump. Neotia said that initial pressure is already visible on materials related to steel, logistics and petrochemicals. If this situation continues, there may be a significant increase in construction costs in the next 1-2 quarters, which may impact prices in future.

shortage of construction material

Sushil Mohta, president of CREDAI West Bengal and chairman of Merlin Group, gave a more urgent warning. He said that if the war continues in April, construction costs will immediately increase by 5 percent. Due to shortage of construction material, construction schedules will also be derailed. Mohta also pointed to long-term risks. He warned that a prolonged conflict could slow India's broader economy. The real estate sector, which completely depends on overall economic conditions, may face rising costs as well as a slowdown in sales and leasing activity.

Increase in steel prices

At the ground level, prices of steel used in construction have already seen a steep rise. Real estate developers said that TMT steel prices increased by almost 20 percent in some markets. Between February and March, prices rose from around Rs 62,000 to Rs 72,000 per tonne. Extensive reports suggest that prices have increased by 18-25 percent in the last 2-3 months. Cement prices remained relatively stable, with fluctuations of only 0-5 percent. However, demand pressure is increasing, which is clearly reflected in the 10.7 percent increase in cement production in January 2026.

profits will be affected

Mahesh Aggarwal, managing director of Purti Realty, said that his company has not increased the prices yet, but they are closely monitoring the current developments. Rising input costs, especially in energy, steel and cement, is a challenge that the real estate industry is currently facing. Our focus remains on maintaining consistency and transparency for our customers. Meanwhile, rating agency ICRA in its latest outlook on the infrastructure construction sector said that geopolitical tensions in West Asia are the main factors putting pressure on bitumen prices.

He said that these prices are expected to impact the operating profits of construction companies. ICRA estimates the operating margin to be in the range of 10.310.8 per cent in FY2025-26 and 10.110.6 per cent in FY2026-27 — much lower than the level of 13.014.0 per cent seen in FY2020-21. However, ICRA estimates that revenue growth of construction companies will increase to 68 percent in FY2026-27, compared to an estimated 24 percent in FY2025-26.