Amid the ongoing US-Iran war, construction costs in India’s real estate sector have risen by more than 25%, according to the Confederation of Real Estate Developers’ Associations of India (CREDAI). Several listed developers have also flagged escalating input costs and warned that expenses could increase further if geopolitical tensions continue, putting pressure on project viability and delivery schedules.
Industry players have also cautioned that the challenge extends beyond rising prices, with certain critical construction materials becoming difficult to procure regardless of cost, a situation rarely witnessed by the sector.
As supply constraints begin to impact availability, project timelines may come under strain, prompting developers to diversify procurement channels, increase domestic sourcing and reorganise construction schedules to minimise disruptions and maintain execution momentum.
Real estate developers, including Oberoi Realty, Lodha Developers, Rustomjee Group and Raymond Realty, among others, have highlighted rising construction costs and growing cost pressures across the sector, amid concerns over increasing prices of raw materials, labour and overall project execution expenses.
Why are construction costs rising due to the US-Iran war?
Construction costs for India’s real estate sector are coming under pressure amid the US-Iran war, as tensions in the Middle East have driven up crude oil prices and disrupted global shipping routes. The rise in fuel costs has increased transportation and logistics expenses, while key inputs such as steel, cement and other building materials have also become more expensive, raising the likelihood of higher project costs and property prices.
CREDAI says construction cost up by 25%
“The current global conflict presents yet another test of that resilience. Construction costs have risen by over 25% since the onset of hostilities, a pressure that is meaningful and warrants attention. However, the organised sector today is far better equipped to navigate such challenges than it has been in previous cycles,” said Shekhar Patel, president of CREDAI National.
“The more immediate concern is not just cost escalation but availability. Certain critical materials are not accessible in the market regardless of price, a situation the sector has rarely encountered. When procurement becomes a constraint beyond pricing, project timelines naturally come under stress, prompting developers to reconfigure procurement pipelines, accelerate domestic sourcing and resequencing construction activity to maintain momentum wherever possible,” Patel said.
According to CREDAI, pressure in the supply chain has been aggravated even more with labour moving away from urban construction areas due to fuel shortages. This dual challenge on materials and manpower needs both industry flexibility and policy support. On that front, CREDAI has engaged with the Union Housing Ministry, seeking appropriate RERA timeline relief to protect both developers and homebuyers.
Earlier this month, HT Real Estate reported that CREDAI had written to the Ministry of Housing and Urban Affairs, urging it to direct state RERA authorities to grant a blanket extension of three to six months for project completion timelines and classify the current situation as a force majeure event for the real estate sector.
The developers’ body said that disruptions in the supply of raw materials, coupled with labour shortages arising from the crisis, have affected construction activity and delayed project execution nationwide.
What do listed developers have to say
Abhishek Lodha, CEO and MD of Lodha Developers, said during the company’s Q4FY26 earnings call earlier this month that the impact of the Middle East crisis on construction costs is currently around 3–5% of overall costs. He noted that gas-dependent material categories have been the most affected, while the overall impact on margins remains ‘very nominal.’
“Our assessment of the impact of construction cost increases has been approximately currently at about three to five percent of overall construction costs. The highest affected categories are the ones which are gas-dependent. This includes tiles, paints, PVC pipes, aluminium formwork, and certain waterproofing elements,” Lodha had said.
Vikas Oberoi, CMD of Oberoi Realty, said rising construction and energy costs, expensive labour and challenges in material availability are putting pressure on the real estate sector. “These are stressing us out, but it is a problem for the entire industry,” Oberoi said during the company’s Q4 FY26 earnings call recently.
Oberoi said on May 11, 2026 that the company now expects construction costs to rise and is factoring the increase into the projects it is undertaking.
“Availability of materials has become a bit of a challenge. So, these are stressing us out. But like I said, it’s a problem for the entire industry, and we all are grappling with it. But yes, now it’s like slowly starting to hurt you in a way,” Oberoi had said.
Boman Irani, CMD of Rustomjee Group, also known as Keystone Realtors, said the construction costs are rising due to disruptions in material supplies and dependence on internationally sourced inputs. “If the dollar continues to spike, then that will be a further increase in the cost,” Irani had said.
According to Irani, the cost increase in the region is about 8% to 13%. “I do not mean overall 8% to 13%, but in certain items, which leads to an overall cost increase of about 5%. We are well insulated because, as you can see from our unsold already launched stock, we will continue to keep selling, and this will allow us to absorb whatever increase in costs takes place,” Irani had said.
Harmohan Sahni, MD and CEO of Raymond Realty, said any rise in construction costs would likely play out over the longer term. Speaking during the company’s Q4FY26 earnings call on May 6, 2026, Sahni said Raymond Realty expects construction costs to rise by around 3-4% if the conflict continues for an extended period.
