Indian Real Estate Sector: Crude oil shock may squeeze affordable housing but premium homes stay resilient: Report
Indian real estate sector is expected to remain broadly resilient despite geopolitical uncertainty stemming from the West Asia crisis, with healthy demand, stronger developer balance sheets and robust office leasing likely to cushion near-term pressures, according to a CareEdge Ratings report.However, a prolonged period of elevated crude oil prices could push construction costs up by 2-3%, putting pressure on affordable housing and highly leveraged developers, the rating agency said in its research report, as per news agency ANI.
Premium housing holds firm as affordability comes under pressure
The impact of the crisis is likely to remain uneven across real estate segments.While affordable housing and project execution could face higher cost pressures, premium and luxury housing are expected to remain relatively resilient, supported by high-net-worth individuals, affluent domestic buyers and non-resident Indians.CareEdge expects residential unit sales across the top six cities to remain broadly range-bound at around 3.55 lakh units in CY2026.The sector has also continued to see a structural shift towards premiumisation. Homes priced above Rs 1.5 crore accounted for 53% of new launches in Q1 2026, up from 43% a year earlier.In contrast, the share of new homes priced below Rs 1.5 crore fell to 47% from 57% during the same period.Higher construction costs and inflation could further strain affordability, particularly for buyers in the lower and mid-income segments.
Stronger developers and office demand provide cushion
Developers are entering the period of uncertainty with healthier balance sheets, which could help the sector withstand short-term volatility.The debt-to-collections ratio of the top 13 residential developers fell from 1.80 times in FY20 to 0.68 times in FY26. At the same time, bookings crossed Rs 1.5 lakh crore, while collections exceeded Rs 90,000 crore in FY26.The office segment is expected to remain another major growth driver. Grade A office absorption across the top six cities is estimated at more than 90 million sq ft in CY2026, supported by strong demand from Global Capability Centres (GCCs), long-term leases and healthy occupancy levels.Listed office REITs recorded occupancy of around 92% in FY26, with CareEdge expecting occupancy to remain above 90% in FY27.Industrial and warehousing real estate is also expected to benefit from longer-term structural drivers, including manufacturing expansion and infrastructure development.
Institutional investment remains strong
Despite the geopolitical uncertainty, institutional investment in Indian real estate remained robust at $3.5-4 billion in the first half of 2026, the highest H1 inflow since the pandemic, according to CareEdge.The rating agency expects longer-term factors such as urbanisation, infrastructure expansion, manufacturing investments and GCC growth to continue supporting India’s real estate sector.The outlook, however, remains sensitive to the trajectory of crude prices. If energy costs stay elevated for an extended period, higher construction expenses could squeeze developer margins and make homes less affordable, particularly in the mass housing segment.Overall, CareEdge expects the sector’s strong underlying demand, healthier developer finances and resilient commercial real estate market to offset much of the near-term impact of the West Asia crisis.
