- March 2, 2022
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Impact of Russia – Ukraine war on Real Estate Sector in India
Experts say the price of building materials like cement may increase as oil prices go up. There is also a likelihood of interest rates rising as RBI may change its accommodative stance to curtail inflation.
After Russia launched an all-out invasion of Ukraine by land, air and, sea, and the United States and Europe promised to retaliate with the toughest sanctions against Moscow, experts warned on Friday, February 25, that The unfolding conflict could spell a potential crisis for India’s real estate sector.
Experts said that in the event of a full-blown conflict, the cost of transportation is likely to rise, and its impact will extend through the supply chain. This can further increase the prices of raw materials, which can increase the cost of manufacturing. And to control the rapidly rising inflation, the Reserve Bank of India (RBI) may change its accommodative stance, which will have an impact on home loan interest rates. He said the impact would be felt in the form of an increase in the cost of construction material including cement due to rising crude oil prices and a possible increase in borrowing cost.
Oil prices have already exceeded $100 a barrel, and stock markets have crashed globally. Oil prices have been rising in the past few months on concerns of disruption in the global supply chain amid the Ukrainian crisis. Indian cement makers, already under pressure from rising raw material and energy costs, are bound to feel the impact, said Harsh Vardhan Patodia, president of the Confederation of Real Estate Developers Association of India (CREDAI).
“Eventually, the impact will subside in the real estate industry as well. While the industry has been resilient, a 20-30% increase in raw material prices has forced developers to marginally increase the prices of projects. From industry forecasts There are indications that there will be a further increase in prices in the coming quarter and given the current crisis, this jump could be manifold.