Niranjan Hiranandani, the Chairman of the National Real Estate Development Council (NAREDCO) and co-founder of the Hiranandani Group, has expressed concerns regarding the recent geopolitical tensions in West Asia and their repercussions on the Indian economy, particularly the real estate sector. He stated that these unexpected developments have led to significant disruptions, especially given that India relies heavily on imports for its energy needs, sourcing approximately 75 to 80 percent of its energy from abroad. Any obstructions in key maritime routes immediately impact the availability and prices of petroleum-based products, which are vital for various industries, including construction.
The real estate sector is currently grappling with rising costs and supply chain issues, particularly in the production of essential building materials. Hiranandani highlighted that tile manufacturing has already been adversely affected, with rising petroleum prices prompting manufacturers to consider increasing costs. While he mentioned that the industry might revert to normalcy if the geopolitical crisis is resolved swiftly, he cautioned that a prolonged conflict could lead to severe economic ramifications, potentially triggering a recession. This underscores the need for a strategic focus on sustainability and energy alternatives in the long term, as the current uncertainties pose significant risks to economic stability.
On the logistics front, the industry is facing increased prices for cement and steel, which Hiranandani indicated could be absorbed in the short term; however, this is dependent on the duration of the crisis. He noted that both cost escalation and material supply disruptions are affecting various industries, including real estate. The affordable housing segment, in particular, is likely to be hit hardest due to its cost-sensitive nature. Hiranandani suggested that government intervention through tax concessions could alleviate some of the burdens on buyers. He recalled the Maharashtra government's previous stamp duty rebate during the pandemic, which provided some relief, and urged for similar measures to be considered in the current climate.
Hiranandani anticipates that property prices will inevitably climb, estimating an increase of approximately 10 to 12 percent within the next few months due to the aforementioned pressures. Despite these challenges, he observed that the luxury housing market remains robust, attributed in part to the 24 percent of sales coming from non-resident Indians (NRIs). He remains hopeful for a swift resolution to the ongoing hostilities, noting the widespread impact on numerous nations. In this context, he emphasized the importance of national self-reliance, suggesting that India must navigate these challenges in a multipolar world. As the situation evolves, stakeholders in the real estate market will need to remain vigilant and responsive to the economic shifts brought about by these geopolitical tensions.