Indian Real Estate sector to remain resilient amid the West Asia crisis: CareEdge Ratings
According to CareEdge Ratings, for CY2026, residential unit sales in top 6 cities are expected to remain broadly range-bound at ~3,55,000 units. It notes that sustained demand, deleveraged developer balance sheets, and robust institutional participation have enabled the Indian Real Estate sector to remain resilient amid the West Asia crisis, reaching a high of $ 3.5 to $ 4.0 billion in H1 2026. Commercial assets continued to account for the largest share of capital, underpinned by sustained GCC expansion and strong office demand.
CareEdge Ratings highlights that the impact of West Asia crisis on Indian Real Estate has been uneven, structurally different across the three segments: affordable housing and project execution face cost pressures, while office leasing remains resilient on Global Capability Centre (GCC) demand, and industrial/warehousing continue to compound on a strong structural base. The surge in Brent crude prices - from around $72/barrel before the conflict to nearly $117/barrel at its peak - triggered cost inflation across sectors, driven by higher fuel, freight, and input costs.
It notes that if the West Asia turmoil persists, it could lead to sustained elevation in crude oil prices, thereby increasing fuel, transportation and key construction material costs, resulting in potential cost escalations of 2-3%, consequently raising project costs and compressing developer margins, particularly for projects in the initial phases of construction.
Overall, the geopolitical uncertainty remains a near-term cost and caution risk rather than a broad demand disruption. Large, organised developers are better placed to manage the pressure, while smaller, highly leveraged developers are more vulnerable. Over the longer term, urbanisation, infrastructure development, GCC expansion and manufacturing investment should continue to support sector growth.
Rajashree Murkute, Senior Director, CareEdge Ratings said, “While the geopolitical situation in West Asia remains a key monitorable, the near-term impact on the Indian real estate sector is expected to remain limited. Healthy demand, resilient premium housing and stable leasing activity across commercial real estate should support the sector's overall performance.”
CareEdge Ratings notes that residential demand has varied across price categories. Affordable housing witnessed weakening amid inflationary pressures and growing affordability concerns, while premium and luxury housing remain relatively resilient. City-level performance is also mixed, with southern and eastern markets generally outperforming other regional markets.
While, office REITs remain relatively protected by high occupancy, long-term leases, contractual rent increases and diversified tenant bases. Industrial and warehousing demand also remains buoyant due to e-commerce, logistics and manufacturing growth. It believes that office leasing is expected to remain resilient, supported by long-term leases, healthy occupancy and contractual rental escalations. For CY2026, gross absorption is estimated to be above 90 msf for Grade A office space in the top six cities. However, prolonged uncertainty could delay corporate expansion plans and leasing decisions, particularly by multinational companies, leading to slower space absorption.
While, warehousing demand may face short-term pressure from higher logistics costs and cautious expansion by export-oriented and third-party logistics (3PL) occupiers amid global uncertainty. However, structural drivers such as 3PL growth, manufacturing investments and domestic consumption are expected to support the sector's long-term growth and keep the vacancy levels contained at ~11% by the end of CY2026.
Divyesh Shah, Director, CareEdge Ratings notes, "Developers are entering this period with stronger balance sheets and improved liquidity than in previous cycles. However, a prolonged period of elevated inflation and tighter financing conditions could put pressure on developers with high leverage or significant refinancing needs, while financially stronger players are expected to remain resilient.”
India’s housing demand, despite several headwinds, remains supported by Pradhan Mantri Awas Yojana – Urban 2.0 (PMAY-U 2.0), urbanisation, rising incomes and improved transparency under RERA. Infrastructure expansion, manufacturing investments and GCC growth are also broadening real estate demand across Tier 1 and emerging Tier 2/3 cities.
The premium and luxury housing segment is likely to remain relatively resilient, with demand supported by high-net-worth individuals (HNIs), affluent domestic buyers and NRIs, who are generally less sensitive to interest-rate movements. However, the affordable housing segment is likely to be affected by prolonged geopolitical uncertainty. Higher crude oil prices could increase construction costs, while elevated inflation and interest rates may reduce affordability for price-sensitive buyers. Limited pricing power could compress developer margins and moderate demand if uncertainty persists
Above views are of the author and not of the website kindly read disclaimer
