Potential Impact of Iran-Israel-US Conflict on Global Oil Markets and Indian Housing

India's Housing Market Outlook Amid Escalating Iran-Israel-US Conflict

Key Takeaways:

• Rising global oil prices due to the escalating conflict in the Middle East may indirectly affect Indian homebuyers, but the impact on housing demand is expected to be gradual and linked to affordability.
• India, which imports nearly 90% of its crude oil, is vulnerable to supply disruptions in the region.
• International crude oil prices surged 9% on March 2 following US and Israeli military strikes on Iran and retaliatory attacks by Tehran.

Impact on Housing Demand:

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• While higher petrol and diesel prices do not directly alter home prices, they influence the cost of living, inflation, and interest rates, which may delay home buying decisions.
• Rising fuel prices can affect construction costs, as cement, steel, and transportation are energy-intensive, but developers are unlikely to immediately pass on higher costs to buyers.
• The affordability route is expected to be the primary channel through which the impact of rising fuel prices is felt on housing demand.

Construction Costs and Home Prices:

• Higher fuel prices can push up construction costs, given the energy-intensive nature of cement production, steel manufacturing, and material transportation.
• Price increases, if any, would more likely be seen in new launches rather than ongoing projects.

Affordable and Mid- Segment Housing:

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• Historically, India's affordable and mid-income housing segments have shown greater resilience during periods of macro uncertainty.
• Demand in these segments is largely driven by end-users rather than investors, making them less sensitive to short-term volatility in fuel or commodity prices.

Outlook:

• Market observers do not expect a sharp disruption in India's housing market unless the geopolitical conflict escalates into a sustained global energy crisis.
• India's housing demand is expected to remain intact, with the affordable and mid-segment housing segments expected to remain strong.