India’s real estate sector is expected to remain resilient despite geopolitical uncertainty arising from the West Asia crisis, supported by sustained housing demand, stronger developer balance sheets and robust institutional participation, according to CareEdge Ratings.
CareEdge Ratings estimates residential unit sales across the top six cities to remain broadly range-bound at around 3,55,000 units in CY2026. Institutional investment in Indian real estate reached $3.5-$4 billion in H1 2026, with commercial assets accounting for the largest share, supported by continued Global Capability Centre (GCC) expansion and strong office demand.
The ratings agency said the impact of the West Asia crisis has been uneven across real estate segments. While affordable housing and project execution are facing cost pressures, office leasing remains resilient on the back of GCC demand. Industrial and warehousing segments, meanwhile, continue to benefit from strong structural growth drivers.
Cost pressures emerge as key risk
The sharp increase in crude oil prices following the conflict has emerged as a key concern for the sector. Brent crude rose from around $72 a barrel before the conflict to nearly $117 a barrel at its peak, triggering higher fuel, freight and input costs.
If the geopolitical crisis persists, sustained high crude prices could push up fuel, transportation and construction material costs. CareEdge Ratings estimates that this could result in 2-3% project cost escalation, potentially compressing developer margins, particularly for projects in the early stages of construction.
However, the agency sees geopolitical uncertainty primarily as a near-term cost and caution risk rather than a broad-based demand disruption.
Large organised developers are considered better positioned to absorb the pressure, while smaller and highly leveraged developers remain more vulnerable to higher costs and tighter financing conditions.
CareEdge Ratings Senior Director Rajashree Murkute said, “While the geopolitical situation in West Asia remains a key monitorable, the near-term impact on the Indian real estate sector is expected to remain limited. Healthy demand, resilient premium housing and stable leasing activity across commercial real estate should support the sector’s overall performance.”
Premium housing remains resilient
Residential demand is showing divergent trends across price segments. Affordable housing has weakened amid inflationary pressures and rising affordability concerns, while premium and luxury housing continue to demonstrate relative resilience.
Demand in the premium segment is being supported by high-net-worth individuals, affluent domestic buyers and non-resident Indians, who are generally less sensitive to interest-rate movements.
Regionally, southern and eastern markets have generally outperformed other markets, although city-level performance remains mixed.
The affordable housing segment, however, could face greater pressure if geopolitical uncertainty persists. Higher crude prices could increase construction costs, while elevated inflation and interest rates could further constrain affordability among price-sensitive buyers.
Limited pricing power could consequently squeeze developer margins and moderate demand.
Office market backed by GCC expansion
The commercial real estate segment continues to benefit from strong office demand and the expansion of GCCs.
CareEdge Ratings expects Grade A office gross absorption in the top six cities to exceed 90 million sq ft in CY2026.
Office REITs are relatively protected by high occupancy levels, long-term leases, contractual rental escalations and diversified tenant bases. The ratings agency expects office leasing to remain resilient, although prolonged geopolitical uncertainty could lead multinational companies to delay expansion plans and leasing decisions, slowing space absorption.
The continuing expansion of GCCs remains a major structural driver for office demand.
Warehousing maintains structural momentum
Industrial and warehousing demand continues to benefit from e-commerce, logistics and manufacturing growth.
The sector could face some short-term pressure from higher logistics costs and more cautious expansion by export-oriented companies and third-party logistics (3PL) operators amid global uncertainty.
However, CareEdge Ratings expects structural drivers such as 3PL expansion, manufacturing investments and rising domestic consumption to sustain long-term growth. Vacancy levels are expected to remain contained at around 11% by the end of CY2026.
Stronger balance sheets offer cushion
Developers are entering the current period with stronger balance sheets and improved liquidity compared with previous cycles. Nevertheless, a prolonged period of elevated inflation and tighter financing conditions could affect highly leveraged developers and those with significant refinancing requirements.
CareEdge Ratings Director Divyesh Shah said, “Developers are entering this period with stronger balance sheets and improved liquidity than in previous cycles. However, a prolonged period of elevated inflation and tighter financing conditions could put pressure on developers with high leverage or significant refinancing needs, while financially stronger players are expected to remain resilient.”
Tier 2 and Tier 3 cities gain momentum
Beyond the major metropolitan markets, infrastructure expansion, manufacturing investments and GCC growth are broadening the real estate opportunity across Tier 1 and emerging Tier 2/3 cities.
Housing demand continues to receive support from urbanisation, rising incomes, the Pradhan Mantri Awas Yojana–Urban 2.0 (PMAY-U 2.0) and greater transparency following the implementation of RERA.
Over the longer term, CareEdge Ratings expects urbanisation, infrastructure development, GCC expansion and manufacturing investment to remain key drivers of Indian real estate growth.
Overall, the agency expects the sector to navigate the West Asia-related uncertainty with relative resilience, although prolonged high crude prices, inflation and tighter financing conditions remain key monitorables for developers and demand, particularly in the affordable housing segment.