The recent escalation of tensions between India and Pakistan have send ripples across real estate, stock markets, and foreign direct investments.
In a show of support, CREDAI, has submitted a proposal to Prime Minister Narendra Modi outlining its preparedness to commence the construction of housing, military infrastructure, or any other facilities as directed by the Government, with a commitment to accelerated timelines.
The realtors’ body also expressed the real estate sector’s solidarity and preparedness to assist the Government in any infrastructure-driven initiatives required to be undertaken in the service of the nation at the testing time of India-Pakistan relations.
Developers have also offered assistance through their skilled workforce, and execution strength across regions for any redevelopment, housing, or infrastructure projects that may be required particularly in regions affected by conflict or in urgent need of development.
“Today, we stand united in deep gratitude, saluting the valour and unwavering resolve of our brave armed forces, and the strong leadership of the Government of India. At this moment where the nation stands united, CREDAI reaffirms its commitment to nation-building. Through our pan-India developer network, technical capabilities, and skilled workforce, we are fully prepared to support any infrastructure-led initiatives that may be required in national interest. We have already initiated the process by reaching out to member developers across the country and identifying key vendors to ensure swift and effective support wherever required.” said Shekhar G. Patel, President, CREDAI.
While, the real estate sector stands strong and has pledged support to government as well, if the current conflict broadens, there might be some ramifications on real estate too.
Housing - Residential absorption in Delhi-NCR and other parts of north India may witness a short-term dip. Luxury housing buyers tend to delay purchases in periods of uncertainty. Demand for mid-income housing will be the first to recover once normalcy is restored. However, prices of cement and steel would remain elevated over the medium term unless the government intervenes.
Commercial real estate - If the conflict persists or widens, one can reasonably expect MNCs to put their entry/expansion plans into India on temporary hold. This would obviously impact absorption numbers, but long-term demand — most notably from the GCC, BFSI and IT sectors - will return and strengthen within 12 months or less.
Retail real estate - Larger malls have less to worry about because of long-term leases and also rent-waiver clauses. They can therefore weather such a storm more adroitly than high-street retail. There might be a drop in footfall and store launches being postponed.
Hospitality real estate – Hospitality sector of Delhi, Kashmir, and other impacted regions are going to be impacted. However, we can also expect a massive surge of 'victory tourism' such as was seen in Kargil once hostilities cease.
Prices and Rentals: - No significant drop in housing capital values is expected 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.
Commenting on war’s effects on Indian real estate Dr. Prashant Thakur, Regional Director & Head – Research, ANAROCK Group said, “We may see some short-term sluggishness in the market, but there is no question of an outright plunge. Much has changed since the bombs last flew at scale - the country's economy has strengthened considerably, its real estate sector has become more disciplined and regulated, and homebuyers showed their strongest side during what was expected to be the death-knell of the housing market - COVID-19.”
Giving a sense of positivity, real estate experts note that past episodes of conflict between India and Pakistan have not had lasting effects on Indian financial assets. As per Ajay Marwaha, head of fixed income at Nuvama Group, if the situation de-escalates soon, the investment climate may not actually be harmed.
