How the West Asia crisis is rattling India's real estate sector

**SPEAKER_1** (0:01)
Hello, folks, you're listening to Finshots Daily. We're back after a small break, and in today's episode, we explain why a prolonged conflict in West Asia is slowing down India's real estate industry.
But before we begin, here's a quick note from Team Ditto. This weekend, we're hosting a free two-day insurance masterclass that helps you build real financial security by understanding health and life insurance the right way. Well, the masterclass is completely free, and you can head to the link in the description to register while your seats last. Okay, let's start with the story.
On Friday, the Ministry of Housing and Urban Affairs issued an advisory that real estate developers across India had been waiting months for. It directed every state's real estate regulatory authority, that is ARERA, the body that regulates builders by monitoring project timelines and protecting home buyers to grant a blanket four-month extension to any registered housing project whose completion deadline falls on or after Feb 28, 2026 Now, this wasn't a random act of generosity. It is something the government is required to do under the ARERA Act, which allows project deadlines to be extended in cases of something called force majeure, or simply events that are genuinely beyond a developer's control. And this time, that event was the ongoing West Asia crisis. Back in April, 2026, the Finance Ministry had formally classified the conflict as a war, and that meant developer bodies like Kridai and Natiko, which had been lobbying for such an extension for months, could finally breathe a huge sigh of relief, as builders no longer had to worry about being penalized for delayed project deliveries. But then, why is a war thousands of kilometers away forcing India's real estate developers to ask for more time?
Well, to understand that, you first have to see what this faraway war has been doing to construction sites across India for months. It all starts with rising crude oil prices, which sit at the center of this entire story. Now, it's not as if the raw materials used to build homes in India are mostly imported. Many are made right here. But there's a catch. A lot of them still depend on energy or petrochemicals during the manufacturing process. Take tiles, for instance. Ceramic and porcelain tiles have to be baked at extremely high temperatures, and that requires fuels like natural gas and propane. But the problem is that India relies heavily on West Asia for its natural gas and pots. So when supplies tighten, production takes a hit. That's exactly what happened in Gujarat's Morbi district, one of India's biggest ceramic and tile manufacturing hubs, where some factories had to temporarily shut down. And tiles are just one example.
The same story plays out across steel, cement, PVC pipes, electrical components, and several other construction materials. Even if they're manufactured in India, higher energy costs and supply disruptions push up production costs and slow deliveries. So builders aren't just waiting longer for materials to arrive, they're also paying more for them. The numbers back this up. According to the rating agency ICRA, crude oil is expected to average around $95 per barrel in FY27, nearly 30% higher than last year. That has already pushed up the cost of key inputs, such as sped coke, diesel, and polypropylene, for cement manufacturers, nudging many companies to raise cement prices by 10 to 12 rupees per bag in April 2026 Steel is facing a similar issue. As the conflict disrupted shipping near the Strait of Hormuz, shipping costs jumped from roughly $9.8 to $12.2 per ton, within weeks of March 26
That has made imported coking coal and iron ore more expensive, further increasing costs for India's steelmakers. And that meant a record 5.4 lakh homes scheduled for completion across India's top seven cities in 2026 were at risk of being delayed. Nearly 70% of them are in Mumbai, Pune and Bengaluru, cities that have been hit the hardest by these disruptions. So if you see, this extension gives developers some much needed respite. Without it, delays could have invited monetary penalties, while home buyers would have been entitled to claim delayed possessions, interest, or even seek full refund. It also protects developers' balance sheets since a rarer default can complicate bank loan classifications and project financing arrangements. By avoiding a default, developers can keep their credit lines and construction financing intact. But here's the thing, the extension only buys time, it doesn't solve the underlying problem or make cement, steel or diesel any cheaper, nor does it magically fix supply chain bottlenecks. It simply sits on top of a market that was already grappling with a different set of challenges. The biggest one being premium and luxury housing. For context, even before the conflict, homes priced above roughly 2 crore rupees were piling up as unsold inventory because developers were launching projects faster than genuine buyer demand could keep up. And this segment has traditionally depended on one very specific buyer. Gulf based NRIs are precisely the buyer pool that's now stepping back. An equities wealth survey of over 8300 gulf based NRIs found that Indian real estate is seeing broad based selling, with nearly 40% of respondents reducing their exposure and shifting money into equities and mutual funds instead. And it's not hard to see why.