India-Pakistan News: Will House Prices Drop or Get Costlier?

India-Pakistan News: Following the tragic massacre of 26 tourists in Pahalgam on April 22 by gunmen from The Resistance Front (TRF)—a group linked to Pakistan-based terror outfit Lashkar-e-Taiba—India retaliated with Operation Sindoor on May 7. The precise airstrikes targeted terror camps in Pakistan and Pakistan-occupied Kashmir (PoK), leading to the destruction of multiple launchpads and neutralisation of key militant operatives.

Pakistan responded with military aggression across the Line of Control, prompting India to launch a counter-offensive that breached air defences and targeted eight Pakistani military bases. Amid global concern, a ceasefire was brokered through US diplomatic intervention, confirmed by Indian Foreign Secretary Vikram Misri after the Director General of Military Operations (DGMO) from Pakistan reached out to his Indian counterpart.

While diplomatic tensions de-escalated momentarily, economic reverberations are only beginning to show, particularly in India’s real estate sector.

Construction on Pause: Sectoral Ripples Across Real Estate
Conflict of this magnitude tends to stall development activity, dampen investor and buyer sentiment, and delay expansion plans in multiple real estate segments. According to market analysts, India's current military engagement mirrors the economic side effects witnessed during the Indo-Pak conflicts of 1971 and 1999.

“Armed conflicts generally have a negative effect on economies, except if a country has reconfigured itself as a 'war economy'. Such economic reinvention happens only during protracted wars and comes with several human costs,” as mentioned in the report by Anarock. 

Read More 
Cash-Strapped Pakistan Makes Public Appeal For More Loans

Housing: Buyer Caution and Supply-Side Disruptions
Homebuyers—especially in northern India—are expected to delay purchase decisions. The Delhi-NCR region, frequently under geopolitical stress, could see residential absorption dip by 5–10% in the coming quarter. However, price corrections are unlikely, thanks to financially disciplined developers and robust bank capitalisation.

“We do not expect any significant drop in housing capital values unless hostilities stretch longer than one fiscal year. Today’s market is dominated by large, listed and financially robust developers who do not carry excessive leverage. This gives them prolonged 'holding power', and the major banks are also well-capitalised. There may be a pause on price hikes, followed by a sharp hike in prices on account of higher construction costs next year,” the report added.
 

Mid-income housing, experts say, will recover first, driven by need-based demand. However, prices of key construction inputs like cement and steel may remain elevated, with possible government intervention needed to rein in inflation.

Commercial Real Estate: Temporary Freeze on MNC Expansion
If hostilities persist, multinational corporations will likely pause or defer entry and expansion plans in India. While this may impact quarterly absorption numbers, long-term demand—especially from sectors like BFSI, GCC, and IT—remains strong and is expected to revive within a year.

Historical precedent supports this: during the Kargil conflict in 1999, although CBDs like Connaught Place witnessed a vacancy spike of 11–15%, companies opted for deferment rather than cancellation of leases. Bengaluru’s IT parks continued to attract tenants, with lease rates between Rs 35–65/sq. ft./month.

Retail Real Estate: Mall Resilience vs. High-Street Woes
High-street retail is likely to bear the brunt of reduced footfall and postponed store launches. In contrast, large malls with long-term lease structures and rent-waiver clauses are better positioned to weather volatility.

Retailers, having adapted strategies during COVID-19, are expected to deploy creative marketing campaigns and offers to bring back foot traffic once normalcy returns.
Back in 1999, Mumbai’s Crossroads and Delhi’s Ansal Plaza—the country’s first-generation malls—delayed their openings briefly, but resumed operations shortly after tensions eased.

Hospitality Sector: Short-Term Shock, Long-Term Recovery
Regions directly impacted by the recent hostilities—like Kashmir and parts of Delhi—are witnessing cancellations in both tourism and business travel. Hotel occupancy could drop by 10–15% in these zones.

That said, the sector has a proven record of rebound. In 1999, despite a surge in cancellations during the Kargil conflict, India recorded a 5.3% rise in foreign tourist arrivals (FTAs), driven by government tourism campaigns and a weaker rupee. Intriguingly, Kargil itself became a tourism hotspot post-conflict, with tourist footfalls doubling to 44,000 per year by 2003.

What the Past Tells Us: Insights from 1971 and 1999

1971 Indo-Pak War:
GDP growth dipped from 5.4% in FY70 to 1% in FY72.
Mumbai saw a 10% decline in property registrations due to steel and cement rationing.
Retail footfalls dropped significantly; legal disputes over shop rents rose by 18%.
Hotel occupancy in Delhi fell below 45%; revenues of hospitality majors plummeted.

1999 Kargil War:
Residential rents in prime areas dropped by 3–8%.
Connaught Place and Fort in Mumbai saw increased commercial vacancies.
Malls delayed openings; tourism dropped in the north but rose nationally.
Revenge tourism later boosted hotel bookings in conflict-affected areas.

The Path Ahead: Resilience Over Risk
Today’s real estate market is not what it was in 1971 or even 1999. With liberalisation, RERA regulations, stronger developer balance sheets, and high investor confidence, the sector is far more resilient.

While geopolitical uncertainties may cause temporary lulls, the fundamentals remain intact. Pent-up demand, conservative lending practices, and a diversified economy ensure that real estate remains on stable footing.

“We may see some short-term sluggishness in the market, but there is no question of an outright plunge. Much has changed since the bombs last flew at scale - the country's economy has strengthened considerably, its real estate sector has become more disciplined and regulated, and homebuyers showed their strongest side during what was expected to be the death-knell of the housing market - COVID-19. We are good to go, for the short or the long haul,” the report concluded.

Short-Term Slowdown, Long-Term Stability
Despite the current tensions between India and Pakistan, the domestic real estate market is expected to endure a short-term pause rather than a plunge. With lessons from past conflicts and the strength of current economic frameworks, India’s property sector is well-positioned to recover, just as it did before, and likely, even faster this time.