One of the largest expenditures in an individual’s life is buying a home or a commercial property. Since the purchase involves a lot of time, energy, and financial resources, it is natural to feel uneasy during challenging times, including geopolitical conflicts and natural disasters.
Although short-lived, the recent Indo-Pak war worries have subsided, providing relief to the market and strengthening buyer and investor confidence. History and data show that past conflicts between the two nations have not had lasting effects on Indian financial assets, including real estate. I think that even during uncertain times, strategic planning can lower risks and open doors to better opportunities. To ensure this, we must first understand the impact of war on the real estate sector.
How War Affects Real Estate
As seen from our experience with the pandemic, India’s real estate industry is more regulated, disciplined, and capable of overcoming obstacles. While we keep our faith intact, buyers and developers may witness a short-term slowdown. However, with de-escalation in effect, we should not worry about a prolonged downturn.
That said, here’s what we can expect in the short term:
Housing sector
Regions near the borders, such as northern and western states and Delhi-NCR, can anticipate a temporary drop in residential absorption. According to a report by Anarock, the tensions between India and Pakistan may cause a temporary fall of 5–10% in housing sales in northern India, including Delhi-NCR. However, with things settling, buyer sentiment could improve, and delayed decisions could resume in the coming weeks.
Historically, luxury property buyers tend to delay big-ticket purchases during periods of uncertainty. During such phases, they are more likely to adopt a wait-and-watch approach. So, we could expect the luxury real estate market, which has experienced rapid growth in recent years, to go into the wait-and-watch mode. On the other hand, the mid-income housing market could be one of the first segments to bounce back within months.
Commercial real estate
Typically, during times of conflict, we expect MNCs and GCCs to delay or temporarily pause their entry and expansion plans in regions facing temporary turmoil. However, in this case, thanks to the swift de-escalation, most projects remain on schedule, and demand could go back to pre-conflict levels within months.
Retail real estate
High street retail stores may see a slowdown in comparison to large malls, which thrive on long-term leases and rent waiver clauses. There may also be a short-term decrease in store openings and foot traffic, but consumers and real estate purchasers will eventually pick up speed.
Tips for Navigating the Real Estate Market during Uncertainties
To avoid pitfalls amid uncertainties, I recommend tailoring strategies that help spread risks. For example,
- Homebuyers should focus more on RERA-registered housing developments supported by listed, financially stable developers.
- Meanwhile, investors should consider exploring opportunities in major cities and diversifying their real estate holdings. Interestingly, Tier-I cities and metropolises are known to recover more quickly from setbacks than the rest.
- On the other hand, developers should secure supply chains if they think it’s necessary. They may also consider delaying new launches and focusing on handing over completed projects to the buyers.
- Meanwhile, commercial tenants should consider negotiating flexible lease terms. At the same time, they must track market trends closely to identify renegotiation opportunities.
I believe that with the situation between the two nations de-escalated, we can look forward to a swift recovery of the market sentiment. The Indian real estate market has been resilient in the face of uncertainties, as evidenced on several occasions. Meanwhile, I would suggest that buyers, investors, and developers plan their strategies carefully to tide them over this current as well as any future challenges.
