How can the Israel-Gaza war impact the real estate market in India?

The Israel-Gaza conflict typically does not have a direct impact on real estate in India. The impact will be felt majorly in the commercial real estate sector, due to the slow movement of funds from Israeli firms and rising input costs due to soaring crude oil prices. Real estate markets are more directly influenced by domestic factors such as economic conditions, government policies, interest rates, and local demand and supply dynamics.

However, indirect factors may have broader implications for global markets, including those in India. Geopolitical tensions and conflicts can contribute to global economic uncertainties, impacting investor confidence and capital flows. This can, in turn, influence financial markets and potentially affect international investments, including those in real estate.

Here are some ways in which global geopolitical events, including conflicts, might indirectly impact real estate markets in India:

1. Investor Sentiment: Global events can affect investor sentiment and confidence. If there is increased uncertainty, investors may become more cautious, which can impact capital flows into various asset classes, including real estate.
2. Global Economic Conditions: The Israel-Gaza conflict can contribute to global economic uncertainties. Economic slowdowns or disruptions in other parts of the world may have indirect consequences for the Indian economy and, consequently, its real estate market.
3. Economic Impact: Geopolitical tensions can contribute to global economic uncertainty, potentially affecting trade and economic growth. Any slowdown in the global economy may indirectly impact the Indian economy and real estate markets.
4. Oil Prices: Geopolitical tensions in the Middle East can affect oil prices. India is a major importer of oil, and fluctuations in oil prices can impact its economy, influencing inflation rates and overall economic stability, which can, in turn, affect the real estate market.
5. Interest Rates and Financing: Geopolitical events can influence global interest rates and financial conditions. Changes in interest rates can impact borrowing costs and, subsequently, influence real estate investment decisions.
6. Foreign Direct Investment (FDI): Real estate markets in India, like in many countries, can be influenced by foreign direct investment. Global events may impact the willingness of foreign investors to invest in Indian real estate.
7. Commodity Prices: Geopolitical tensions can affect commodity prices, including those of construction materials. Any significant fluctuations in prices can impact construction costs and, by extension, real estate development.
8. Interest Rates and Capital Flows: If the conflict affects global interest rates or capital flows, it could indirectly influence Indian real estate. Changes in interest rates can impact borrowing costs, affecting the affordability of property purchases and development projects.
9. Effect on India-Israel bilateral trade: India’s major exports to Israel include automotive diesel, chemical and mineral products, machinery and electrical equipment, plastics, textile and apparel, transport equipment, and agricultural products.  India primarily imports defence machinery, petroleum oils, electrical equipment and transport equipment. The bilateral trade could take a hit if the Israel-Hamas war is prolonged.

It’s essential to monitor both global and domestic economic trends and geopolitical developments for a comprehensive understanding of the potential indirect impacts on real estate in India or any other country. Real estate, being a long-term investment, is influenced by a complex interplay of various factors, and geopolitical events are just one of them.