Mumbai: India’s real estate sector is expected to remain resilient despite the ongoing uncertainty caused by the West Asia crisis, with strong housing demand, healthier developer balance sheets and continued institutional investment supporting the industry, according to a report by CareEdge Ratings.
For calendar year 2026, residential sales across the top six cities are expected to remain broadly stable at around 3.55 lakh units, the rating agency said. Institutional investment in Indian real estate reached $3.5 billion-$4 billion in the first half of 2026, with commercial assets attracting the largest share of capital due to continued Global Capability Centre (GCC) expansion and strong office demand.
However, the impact of the geopolitical crisis is expected to vary across segments. While office leasing remains relatively strong and industrial and warehousing demand continues to benefit from structural growth, affordable housing and projects in the early stages of construction could face higher costs.
The rise in Brent crude prices from around $72 per barrel before the conflict to nearly $117 per barrel at its peak has increased fuel, transportation and input costs. CareEdge Ratings said a prolonged crisis could push up construction costs by 2-3%, potentially reducing developer margins, particularly for projects at the beginning of their construction cycle.
“While the geopolitical situation in West Asia remains a key monitorable, the near-term impact on the Indian real estate sector is expected to remain limited. Healthy demand, resilient premium housing and stable leasing activity across commercial real estate should support the sector's overall performance,” said Rajashree Murkute, Senior Director, CareEdge Ratings.
The agency said geopolitical uncertainty currently represents more of a near-term cost and caution risk than a broad-based demand disruption. Large organised developers are considered better positioned to absorb the impact, while smaller and highly leveraged players could face greater financial pressure.
Residential demand has been uneven across price segments. Affordable housing has faced pressure from inflation and concerns over affordability, while premium and luxury homes have continued to see relatively stronger demand.
Southern and eastern markets have generally performed better than some other regional markets, the report said.
Premium and luxury housing is expected to remain comparatively resilient as demand from high-net-worth individuals, affluent domestic buyers and NRIs is less sensitive to interest-rate movements.
In contrast, prolonged geopolitical uncertainty could further affect affordable housing, as higher construction costs, inflation and interest rates could reduce purchasing capacity among price-sensitive buyers.
The office segment is expected to remain supported by high occupancy levels, long-term leases, contractual rental escalations and diversified tenant bases.
For 2026, gross absorption of Grade A office space in the top six cities is estimated to exceed 90 million sq ft. However, if global uncertainty continues for an extended period, companies—particularly multinational firms—could delay expansion plans and leasing decisions, slowing the pace of space absorption.
Industrial and warehousing demand is also expected to remain supported by e-commerce, logistics and manufacturing activity. While higher logistics costs and cautious expansion by export-oriented companies and third-party logistics operators could create short-term pressure, structural drivers are expected to sustain long-term growth.
Warehouse vacancy is projected to remain contained at around 11% by the end of 2026.
“Developers are entering this period with stronger balance sheets and improved liquidity than in previous cycles. However, a prolonged period of elevated inflation and tighter financing conditions could put pressure on developers with high leverage or significant refinancing needs, while financially stronger players are expected to remain resilient,” said Divyesh Shah, Director, CareEdge Ratings.
The agency said domestic real estate demand continues to receive support from PMAY-U 2.0, urbanisation, rising incomes and greater transparency under RERA. Infrastructure expansion, manufacturing investments and the growth of GCCs are also widening the real estate market beyond established Tier-1 cities to emerging Tier-2 and Tier-3 centres.
Overall, CareEdge Ratings expects the sector to remain on a stable footing, although the duration of the West Asia crisis, crude oil prices, inflation and financing conditions will remain key factors to watch.
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