India-Pak tensions may temporarily dent housing sales across Delhi-NCR and northern India by 5–10%: Anarock

With regard to housing capital values, the analysis noted that it does not foresee any significant drop “unless hostilities stretch longer than one fiscal year.”

“Today’s market is dominated by large, listed and financially robust developers who do not carry excessive leverage. This gives them prolonged ‘holding power’, and the major banks also are well-capitalised. There may be a pause on price hikes, followed by a sharp hike in prices on account of higher construction costs next year,” said Prashant Thakur, head of research at real estate consultancy Anarock.

Cement and steel prices may also increase in the medium term due to high demand from the defence sector unless the government decides to intervene, he said.

If the Indo-Pak tensions persist, residential absorption in “Delhi-NCR and other parts of northern India could see a short-term decline of 5–10%. Luxury housing buyers tend to delay purchases in periods of uncertainty,” he said. 

However, the mid-income housing segment is expected to recover first once stability is restored. The analysis also indicated that housing capital values are unlikely to see a significant drop unless the conflict extends beyond one fiscal year. Additionally, cement and steel prices may rise in the medium term due unless the government steps in to stabilize supply and pricing, it noted.

Capital values may take a hit due to lower demand but it does not impact rents, he said.

Impact on commercial and retail real estate

If the tensions continue, commercial real estate could see temporary delays in MNC expansion plans, impacting short-term absorption, though demand from sectors such as GCC, BFSI, and IT is projected to rebound within a year, Thakur said. 

Retail real estate may see high-street outlets hit harder than large malls, which benefit from long-term leases and protective clauses. Still, Indian retailers are likely to adapt quickly, as seen during the COVID-19 period, he said. 

The hospitality sector may face a 10–15% dip in occupancies in regions like Delhi and Kashmir, although domestic leisure travel, which makes up the majority of demand, is expected to remain steady. While price hikes may pause if hostilities persist, capital values are expected to hold firm due to the financial strength of large developers and well-capitalized banks. Nonetheless, rising construction costs could push property prices higher in the coming year, he said.

Overall impact on the real estate markets

The last two most significant military engagements — the Indo-Pak war in 1971 and the Kargil war in 1999, “we saw this process unfold in all the four critical real estate sectors: residential, commercial, retail, and hospitality,” he said.

He noted that India’s real estate market benefited from three major factors after both the 1971 Indo-Pak war and  1999 Kargil War. “Pent-up demand (the need for homes and offices obviously continued), stricter regulations (RBI’s conservative lending norms kept leverage low, which helped curtail panic), and quick stock market recovery. While the Nifty dropped approximately 5% at various points of these two conflicts, it snapped back within 5-6 months to deliver positive returns,” he added.

“We may see some short-term sluggishness in the market, but there is no question of an outright plunge,” he added.