Hormuz effect: Your luxury flat will get pricier as construction costs soar

Shipping disruption pushes up construction costs, delays projects

The ongoing disruption in the Strait of Hormuz is beginning to ripple through India’s real estate sector, sharply increasing construction costs, delaying supplies and casting uncertainty over project timelines—particularly in the luxury housing segment.

 

According to estimates by ANAROCK Group, the blockade has forced ships to reroute around the Cape of Good Hope, adding 10–20 days to delivery timelines and increasing freight costs by ₹1.5–3.5 lakh per container. War-risk premiums, higher insurance costs and rising marine fuel prices—now at nearly ₹1 lakh per tonne—have further inflated logistics expenses.

 

"At a time when housing sales were already tapering, Indian developers are now confronted with an even starker landscape and must find new ways to weather the intensified storm. Diplomatic manoeuvring has succeeded in getting at least some LPG tanker ships through the Strait. However, bulk imports must now travel an additional 6000-10000 nautical miles, with marine fuel now at about INR 1 lakh/tonne. Also, there are additional 'war surcharges' and steeply hiked shipping insurance costs. It has become so serious that Indian regulators are now cracking down on shipping profiteering," said Dr. Prashant Thakur, Executive Director & Head - Research & Advisory, ANAROCK Group.

 

 

Construction costs spike across key inputs

 

The immediate fallout is visible in core construction materials. Steel prices have surged nearly 20% to ₹72,000 per tonne, adding roughly ₹50 per sq ft to high-rise construction costs. This is particularly significant for Mumbai, where over 10,000 luxury units are currently under construction.

 

 The cost of hot rolled coil now hovers at Rs 51,000-56,000 and may hit Rs 62,000 by June if the situation does not change for the better.

 

Skyscrapers use ribbed steel rods embedded in concrete to give it tensile strength, and this added cost has a direct correlation to the cost and speed of constructing them. Diesel for construction cranes and mixers is heavily associated with the $100+ price of Brent crude. This price shock will reflect significantly on construction sites in Mumbai, Delhi-NCR, Hyderabad, and other high-rise-centric cities around the country.

 

With aluminium plants in Bahrain and Qatar now either partially or fully down, the price of aluminium - another important construction input - now hovers at around Rs 3.5 lakh/tonne. Delhi’s facade-heavy office parks, where aluminium-glass curtain walls dominate the external envelope, will witness steep cost overruns. The price of bitumen, required to construct critical infrastructure projects like the Mumbai-Nashik expressways and Delhi’s peripheral roads, had already risen to Rs 48,000-51,000/tonne.

 

Luxury housing is among the most affected segments. The Italian Statuario and Calacatta marble used in Mumbai’s sea-facing penthouses and other ultra-luxury units now comes with an addition Rs 50-150/sq ft premium due to the rerouting fees, resulting in Rs 6000/sq. ft. total all-in cost for this marble once it is installed. Premium plotted developments will face similar cost additions on imported fittings.

 

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.

 

Impact on Luxury Capital Mumbai

 

The impact will be most pronounced in India’s high-end housing hotspots. 

 

"Mumbai Metropolitan Region (MMR), India’s skyscraper king with 300+ towers, over 5,500 high-rises, is also the leader in India’s ultra-luxury housing segment (homes priced above Rs 40 Cr.). In 2024, India saw 59 ultra-luxury homes priced above Rs 40 Cr. sell for a combined value of about Rs 4,754 Cr., with Mumbai alone accounting for roughly 88% of both units and value in this bracket. Micro-markets such as Worli have emerged as epicentres: Worli by itself has logged over Rs 5,500 Cr. of Rs 40 Cr.-plus apartment sales in just two years and now accounts for about 40% of India’s ultra-luxury apartment transactions," said the Anarock report. 

 

In volume terms, this speaks for the bulk of such high-end residential units sold across the country. South Mumbai, BKC, Worli, and Lower Parel lead the city’s luxury vertical boom and are where almost all such projects are heavily concentrated in Mumbai. These markets are going to experience the strongest blow of the Hormuz-induced construction price shocks. It will probably not impact ultra-luxury sales, though.

 

Luxury Sales – On Safer Ground (But Not Immune)

 

Buyers of affordable and mid-range housing continue to struggle with steep EMIs. The RBI has kept its key rate at 5.25%, so home loan interest rate is now between 7.35% and 13.20%, depending on various factors. Meanwhile, high oil prices due to the Gulf crisis are pushing up prices across the economy, so there is little hope of any rate cuts anytime soon. However, luxury housing sales do not really operate in that realm. While most developers of luxury projects expect to have to hike their prices by over 5%, their target clientele can largely absorb the hikes without much strain.

 

Developers may hike prices, but demand holds

 

While construction costs are rising, demand in the luxury segment is expected to remain relatively resilient.

 

Developers are likely to increase prices by over 5%, but high-net-worth buyers are generally better positioned to absorb such hikes. Unlike mid-income housing, which is sensitive to interest rates and EMIs, luxury housing operates on different demand dynamics.

 

However, indirect risks remain.

 

NRI demand faces disruption

 

Non-resident Indians (NRIs), especially those based in the Gulf, account for a significant share of luxury housing demand.

 

NRIs contribute 15–22% of high-end housing sales in cities like Mumbai and Delhi

 

In premium projects, their contribution can exceed 30% of total sales value

 

With flight disruptions and travel delays due to the geopolitical situation, NRI buyers may face challenges in visiting sites and closing transactions, potentially slowing deal closures in the near term.

 

Supply chain bottlenecks may persist

 

Even if the geopolitical situation eases, the impact on real estate may linger.

 

Industry experts estimate:

 

2–8 weeks for shipping backlogs to clear

 

1–3 months for supply chains to stabilise fully

 

Freight contracts locked at higher rates and elevated insurance premiums are likely to keep costs high in the near term. Delays in the arrival of key materials like steel and aluminium could also push project timelines beyond typical delivery schedules.

 

"Freight surcharges and higher shipping insurance will remain high in locked contracts. War-risk surcharges and rerouting have cumulatively added anywhere between Rs 2–3.5 lakh per container, especially for cargoes linked to Gulf routes. This severely impacts imported finishes, metals, and high-value components commonly used in South Mumbai luxury towers. The port backlogs will delay the arrival of steel and aluminium," noted the report. 

 

Broader implications for the sector

 

The current disruption comes at a time when housing demand was already showing signs of moderation and construction costs had risen sharply over the past few years.

 

Construction costs in cities like Mumbai and Delhi have increased up to 39% in the last four years, averaging around ₹2,780 per sq ft

 

Labour costs have risen 25–40%, driven by skill shortages and wage inflation

 

The Hormuz crisis adds another layer of pressure on developers’ margins and project viability.