Stuck between moderating sales sentiment and rising supply, the real estate sector is now facing a sharp spike in input costs because of the war in West Asia. Almost all building materials, including steel, aluminium, and cement, have seen price rises since the war. This is in addition to fuel prices, which affect shipping costs and crane operating costs, among others.

Steel prices hit a three-year high after the war was declared due to tighter supplies and ongoing demand. Steel prices surged by around 20% to Rs 72,000/tonne, from Rs 62,000 earlier, notes real estate consultancy Anarock. Aluminium prices zoomed by around 35% in 2026 so far, as per Trading Economics. Crude prices were at $60/barrel at the beginning of the year and are currently hovering around $100/barrel.

“Steel and cement together account for nearly one third of total construction costs, and recent increases in commodity prices are expected to drive a 7-12% rise in overall construction costs,” Pratik Tibrewala, senior VP & head of corporate finance at developer M3M India, told The Core.

The Cost Of Confusion

Regular talks of ceasefire and the consequent failed negotiations are adding to the volatility that’s changing the supply as well as price dynamics.

“The prices of all the building materials, which are the backbone of construction, have moved up at least 15%,” Nikhil Madan, director at Mahima Group, told The Core. “The price rise itself is not the only problem; it’s the state of confusion which is leading to daily fluctuations in prices. Vendors are unable to quote a delivery price, and it’s in a state of wait-and-watch mode.”

Given the long gestation period for construction projects, sudden spikes in expenses can upend a project’s financial viability.

“As it is, construction costs in cities Mumbai and Delhi have risen by as much as 39% over the past four years and now average at around Rs 2,780/sq. ft. for mid-to-luxury skyscrapers. The cost of construction labour, which is commonly 25-35% of total project cost incurred by the developer, has risen by anywhere between 25-40% in the last 4-5 years because of sharpening skilled worker shortages and overall wage inflation,” Prashant Thakur, executive director & head of research & advisory at Anarock Group, said in a note.

Labour Lost & Close Of Morbi

The migration of labour back to villages due to LPG shortage might add to the costs as well as project delays that are dogging the sector. Moreover, forced re-routes of ships around the Cape of Good Hope have added a minimum of 10 to 20 days to shipping times. This also raises the cost to as much as Rs 1.5-3.5 lakh per container. War surcharges are adding an upswing to the insurance costs as well.

“For the last few years, the pressures on the construction side are only going up, and not going down,” comments Vikas Jain, CEO of real estate company Labdhi Lifestyle.

The most excruciating impact has been on the supply of tiles, both domestic and imported. They also impact the projects that are very close to promised possession dates, and could have an impact on delivery timelines.

“Tile production has stopped in Morbi (in Gujarat), and as many as 80% of factories are shut. These units run on gas, and they have been impacted. Most vendors are quoting at least 50% higher prices, and we are negotiating with them. For imported tiles, delivery itself has stopped because of shipping issues,” Ram Raheja, managing director of S Raheja Realty, told The Core.

Affordable Unit Prices To Rise

Kotak Institutional Equities estimates the margin impact of these cost hikes at 200–300 basis points, potentially reaching 500 bps should tensions persist. As per current real estate rules, developers cannot pass on increased costs to the consumers.

“The prices for unsold units will remain the same. Only the prices of unsold units can go up, as there could be a proposition to increase prices. But in real estate, the selling price is a function of market prices and does not depend on input costs,” said Pramod Ranjan Dwivedi, president of real estate at Ambuja Neotia

Sales have softened in 2026. According to Anarock Research & Advisory, as of Q1 of 2026, sales have declined 7% quarterly and risen by 9% on an annual basis. Supply, however, has gone up by 26% on an annual basis.

If there is a price rise, they are more likely to impact affordable homes the most. “Developers can recalibrate pricing for unsold inventory and upcoming launches. In practice, the extent of pass-through depends on demand conditions, competitive dynamics and the project segment, with premium and luxury projects being relatively less impacted than affordable and mid-income housing, where margins are tighter,” said Tibrewala.

Jain noted that while land represents the largest expense in luxury developments, the opposite is true for affordable housing. Also, early sales are higher amongst the latter. “Most of the luxury project sales tend to take place in the later part of the cycle, where users can experience the touch and feel. Early sales for luxury are in single digits, while in the affordable, they are at 15-20%,” he added.

Dwivedi believes that if the situation extends for another month or a month and a half, it might have an overall impact on project costs. Most developers, however, hope that the situation can be resolved soon, which will allow them to absorb these sudden input cost effects.

Most developers are keen on sticking to delivery timelines as mandated by RERA rules. “It’s a very recent issue and will not be an issue now. If the situation continues, industry bodies make a representation to RERA, and they will intervene if the war continues,” said Madan.