India-Pakistan Tensions May Impact Delhi-NCR Housing Sales

The real estate market in Delhi-NCR and northern India is facing uncertain times, with tensions between India and Pakistan likely to dent housing sales in the short term.

According to an analysis by Anarock, a leading real estate consultancy, the housing market in the region could experience a decline in sales of approximately 5–10%, particularly in the luxury housing segment, as prospective buyers adopt a more cautious approach. While the impact may be temporary, market players are bracing for some volatility as geopolitical tensions persist. Anarock’s experts suggest that luxury homebuyers in Delhi-NCR and other parts of northern India are likely to put off major property investments amidst the rising uncertainty. With a history of geopolitical conflicts between the two nations, buyers tend to adopt a “wait-and-watch” approach when tensions run high, particularly in regions that might be perceived as vulnerable. This is expected to affect demand in the premium segment, where consumers are more inclined to delay large investments during uncertain times.

The mid-income housing sector, however, is anticipated to recover more swiftly once the situation stabilises. While overall market conditions may remain subdued in the short term, Anarock’s analysis indicates that the demand for mid-segment properties could bounce back quicker, driven by the fundamentals of affordable housing and growing urbanisation in the region. Experts also note that the luxury segment, while facing a dip, is unlikely to see a significant decline in property values unless the situation extends beyond a fiscal year. The holding power of major developers, who are now financially more robust and better capitalised compared to the past, ensures that the market is less vulnerable to sharp fluctuations in capital values. Moreover, listed developers who dominate the market today are not over-leveraged, providing them the resilience to weather short-term disruptions without triggering panic selling.

Regarding the long-term outlook for housing capital values, experts suggest that any significant drop is unlikely unless hostilities persist for an extended period, potentially extending beyond one fiscal year. In the current market, developers are taking a cautious stance with price hikes, which could pause for a time. However, the prevailing sentiment is that construction costs, driven by an uptick in demand for materials such as cement and steel, could eventually lead to price increases in the coming year. This rise in construction costs is primarily attributed to heightened demand from the defence sector, which is anticipated to require more raw materials in the short term. As a result, the increased cost of building materials could translate into higher property prices across the board. Anarock experts point out that unless the government intervenes to stabilise supply and pricing, the upward pressure on construction costs is likely to continue.

While the residential sector grapples with uncertain demand, commercial real estate, too, faces potential setbacks. The expansion plans of multinational corporations (MNCs) may be temporarily delayed as they take a more cautious approach amid the geopolitical uncertainties. However, experts predict that sectors such as banking, financial services, insurance (BFSI), information technology (IT), and government contractors (GCC) could rebound within a year, stabilising the demand for office spaces in the medium term. Retail real estate, especially high-street outlets, could experience more substantial challenges compared to large malls, which typically benefit from long-term leases and protective clauses. Nevertheless, Indian retailers are known for their adaptability, a quality that was evident during the COVID-19 pandemic. As such, it is expected that the retail sector will adjust to the current market environment, though short-term occupancy rates may see a slight dip.

In the hospitality sector, the impact is expected to be more pronounced in regions like Delhi and Kashmir, where occupancy rates could fall by 10–15%. However, experts remain optimistic about domestic leisure travel, which continues to be the largest driver of demand in the hospitality industry. Despite this, the sector is not entirely immune to the broader economic effects of geopolitical instability. While current tensions between India and Pakistan have raised concerns in the real estate market, a historical perspective offers some reassurance. The Indo-Pakistani conflicts of 1971 and 1999 provide valuable insights into how the real estate market responded during and after periods of military engagement.

After both the 1971 war and the 1999 Kargil conflict, India’s real estate market benefited from a combination of pent-up demand, tighter regulations, and a relatively quick recovery of the stock market. During these conflicts, the market saw a short-term dip, but demand for housing and office space continued to grow once stability returned. The presence of financial regulations, such as conservative lending norms by the Reserve Bank of India (RBI), helped prevent over-leverage, which curtailed any major panic selling. The stock market also displayed resilience, with indices like the Nifty experiencing brief dips during periods of heightened conflict but recovering quickly within months to deliver positive returns. This historical pattern suggests that while the real estate market may experience temporary setbacks, it is generally well-positioned to rebound in the long run.

In the short term, the real estate market in Delhi-NCR and other parts of northern India faces challenges. The combination of geopolitical tensions, the potential for rising construction costs, and caution among high-value property buyers is likely to weigh on housing sales, particularly in the luxury segment. However, the broader market dynamics, including resilient developers and well-capitalised financial institutions, are expected to provide stability. Once the situation normalises, the market is poised for a recovery, with mid-income housing likely to lead the charge. The underlying demand for homes in India’s rapidly urbanising regions remains strong, and urban development initiatives will continue to drive the demand for residential, commercial, and retail spaces.

While the current period may pose challenges for the real estate market, the long-term prospects for the housing sector in northern India, particularly Delhi-NCR, remain positive. Investors and buyers, while cautious in the short term, may find opportunities in the medium to long run, with market fundamentals remaining strong.

India-Pakistan Tensions May Impact Delhi-NCR Housing Sales