Rising Construction Costs in India Due to US-Iran War Impact Real Estate Sector
US-Iran war pushes up real estate construction costs by 25%; Developers warn project timelines could come under strain
Image: Hindustan Times
The ongoing US-Iran war has led to a significant increase in construction costs in India's real estate sector, rising by over 25%. Developers are facing challenges with material availability and escalating expenses, prompting calls for project timeline extensions from the government.
- 01Construction costs in India's real estate sector have increased by more than 25% due to the US-Iran war, according to the Confederation of Real Estate Developers' Associations of India (CREDAI).
- 02Developers are struggling with procurement of critical materials, which are becoming scarce regardless of price, affecting project timelines.
- 03Abhishek Lodha, CEO of Lodha Developers, noted that the impact of the Middle East crisis on construction costs is around 3-5% of overall costs, particularly affecting gas-dependent materials.
- 04CREDAI has requested the Ministry of Housing and Urban Affairs to grant a 3-6 month extension for project completion timelines due to the current situation.
- 05Developers like Vikas Oberoi of Oberoi Realty and Boman Irani of Rustomjee Group have expressed concerns about rising costs and material availability, which are stressing the entire industry.
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The ongoing conflict between the US and Iran has resulted in a more than 25% increase in construction costs within India's real estate sector, as reported by the Confederation of Real Estate Developers' Associations of India (CREDAI). This surge is attributed to rising crude oil prices and disrupted global shipping routes, which have escalated logistics and material costs. Developers, including notable firms like Oberoi Realty and Lodha Developers, are facing significant challenges not only from increased expenses but also from difficulties in procuring essential construction materials. The situation has prompted CREDAI to seek a 3-6 month extension for project timelines from the Ministry of Housing and Urban Affairs, classifying the current crisis as a force majeure event. Industry leaders have indicated that the impact on construction costs is primarily felt in gas-dependent materials, with estimates suggesting an overall increase of 3-5% in costs. The compounded issues of material shortages and rising labor costs are creating a challenging environment for developers, necessitating adjustments in procurement strategies and construction schedules.
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The rise in construction costs is likely to affect homebuyers and project timelines across India, potentially leading to delayed housing deliveries.
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