Why the Strait of Hormuz crisis could spell higher prices and bigger EMIs for homebuyers

The Straight of Hormuz blockade amid the US-Israel vs Iran war has not only disrupted fuel supply chains but also hit India's real estate industry. Iran’s stranglehold on this critical waterway between the Persian Gulf and the Gulf of Oman has impacted a substantial amount of India’s shipping imports.

According to a report by Anarock Research, the forced rerouting of ships carrying construction materials around the Cape of Good Hope has added anywhere between 10-20 days to shipping times and as much as ₹1.5-3.5 lakh per container to the costs.

While diplomatic efforts have led to the passage of a few India-bound LPG tankers through the Straight, much of the shipping imports are now spending more to reach Indian shores.

The report says that bulk imports must now travel an additional 6000-10000 nautical miles, with marine fuel now at about ₹1 lakh/tonne.

Moreover, there are additional 'war surcharges' and steeply hiked shipping insurance costs, so much that it has led to Indian regulators to crack down on shipping profiteering.

If the crisis doesn't end soon, it will not only impact new home buyers but also existing buyers, who are paying monthly home loan EMIs.

Impact on new home buyers

The Hormuz blockade has resulted in higher input costs for under-construction buildings. If this continues, homes could become more expensive. Here are some alarming data from Anarock Research:

• Steel prices have surged by around 20% to ₹72,000/tonne, from ₹62,000 earlier. At a very rough estimate, this adds approx. ₹50/sq. ft. to the cost of building high-rises in cities like Mumbai.

• The cost of hot rolled coil now hovers at ₹51,000-56,000 and may hit ₹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 USD 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, which is another important construction input, now hovers at around ₹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 ₹48,000-51,000/tonne.

The report says that 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 ₹50-150/sq ft premium due to the rerouting fees, resulting in ₹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," it says.

According to the report, the impact of the ongoing crisis will be most pronounced in India’s high-end housing hotspots, such as Mumbai's BKC, Worli, Lower Parel and South Mumbai. "These markets are going to experience the strongest blow of the Hormuz-induced construction price shocks," the report says, adding "It will probably not impact ultra-luxury sales, though."

Impact on existing homebuyers

Most buyers of affordable and mid-range housing units continue to struggle with steep EMIs.

For the last several months, the RBI has kept its repo rate at 5.25%, leading to home loan interest rates between 7.35% and 13.20%.

However, higher oil prices due to the Gulf crisis could push up prices across the economy, leaving little hope of any rate cuts anytime soon. This means, homebuyers cannot expect any further reduction in their home loan EMIs soon.

How long will recovery take once the crisis ends?

Even if the Gulf war ends tomorrow, the Strait of Hormuz opens and shipping resumes normally, the additional real estate costs will not reduce immediately.

"We can expect a 2–8-week period for tanker pileups to clear as carriers test the safety of the route. Freight surcharges and higher shipping insurance will remain high in locked contracts. War‑risk surcharges and rerouting have cumulatively added anywhere between ₹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," the report said.

It further said that a full reset will take anywhere between 1-3 months. Moreover, a reboot of global shipping will not help developers to achieve their usual monsoon timelines.