Surge In Crude Oil Price Could Impact The Real Estate Market Of India

The ongoing Russian invasion of Ukraine has not only impacted the global economy but also the crude oil prices. The US and Europe pledged to react against Moscow with the most severe sanctions.

Oil prices have already surpassed $100 per barrel, and stock markets throughout the world have fallen. Oil prices have risen in recent months due to fears about interruptions in the global supply chain as a result of the escalating Ukrainian situation.

On Thursday 24 February, real estate experts warned that the unfolding conflict could spell a potential crisis for India's real estate sector. Real estate developers are concerned that escalating geopolitical tensions between Russia and Ukraine would put higher pressure on input costs.

While the cost of key raw materials including cement and steel has been on the rise for the last several quarters, developers fear the cost-push this time may need to be passed on to homebuyers. The effects will be felt on both the demand and supply sides, which is bad news for the real estate industry.

Realtors' body CREDAI on Thursday said housing prices may increase in the coming months due to the likely rise in rates of raw materials like cement amid the conflict between Russia and Ukraine.

In a statement, Confederation of Real Estate Developers' Associations of India (CREDAI) President Harshvardhan Patodia said: "Post the geopolitical escalations, oil prices have surged, and stock markets have crashed globally." Oil prices have risen steadily in recent months, owing to fears about interruptions in the global supply chain as a result of the crisis, he added.

The impact would be felt by Indian cement producers, who have already been impacted by increased raw material and energy costs, according to Harshvardhan Patodia, president of the CREDAI.

While the sector has remained robust, the CREDAI president stated that a 20-30% increase in construction raw material prices has pushed developers to raise project pricing somewhat.