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The ongoing tariff war between India and America has been hitting the headlines over the past few weeks, with US President Donald Trump declaring an unprecedented 50% import duty on most of our labor-intensive sectors such as textiles, shrimp and seafood, jewellery and gems, and footwear.
India hopes to counterbalance the losses of this trade ‘attack’ — options include redirecting businesses to other international destinations and increasing the absorption of commodities by the domestic market, which already absorbs 80% of our goods. The Indian government is also implementing supportive policies, including GST simplification and export promotion initiatives. However, the tariff hike is feared to be a major blow as America is the market for around 20% of India’s exports.
In fact, the effect is already showing. According to reports, August shipments to the US dipped to $6.7 billion, which is 16.3% less than the figures of July. As per some media reports, if the tariffs are not lifted by the end of FY 2026, the country could lose around $30-35 billion. The figures are staggering. For example, at 30%, America is the largest buyer of our jewellery and precious stones. Last year, India exported jewellery and gems worth around ₹87,600 crore to the US. In the current scenario, these exports could drop by 75%, resulting in loss of livelihoods and revenue worth thousands of crores.
While not directly hit, the Indian real estate sector is also likely to feel the ripple effects — both positive and negative — of this tariff hike. Let’s examine how.
Favourable Outcomes
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Boosts NRI investment in India
While the tariff crisis has impacted most other sectors, real estate is emerging as a safe investment choice among Indians living in the country and abroad. According to experts, the country’s property market — especially the commercial and luxury segments — is valued for its stability, long-term price appreciation, and (rental) income potential. The current situation is expected to attract many more NRIs, particularly those living in the US and earning in dollars, towards these. -
The Chinese effect
While India is facing the heat, heavier tariffs have been imposed on China, which is expected to prompt many businesses to relocate their manufacturing hubs to other countries. Experts opine that India’s tier II cities could become a popular destination for many of these firms, which will, in turn, boost demand for commercial and industrial properties. This could, in turn, prove beneficial for the residential market as well. Also, high tariffs are likely to hamper China’s steel exports to the US. This could mean an increased supply to India, thus lowering its prices. A popular construction material, a dip in steel prices could also reflect in home-buying costs. -
Economic growth
Diversion of trade from countries like China to India can spur economic growth in the country, which will also benefit the Indian real estate sector. Additionally, India is on a growth trajectory, which has made it resilient against the tariff onslaught. Experts say that a strong domestic market with rising consumption, growing GDP, and the recent GST reforms — read all about it in this blog — will prevent a major impact. According to recent reports, our stock markets have also managed to register “positive returns” despite the US tariffs.
The Adversities
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Recession fears may hit the real estate sector
Most major cities in India, including Bangalore, Chennai, Pune, and Mumbai, have a sizable IT industry, and their workforce plays a significant role in driving the local residential property markets. However, many experts fear that the hike in tariff rates will eventually lead to a recession that could impact the IT sector. If the threat of recession becomes imminent, many will hesitate to buy properties, thus dampening the real estate market in the country. -
Budget homes take the beating
Affordable housing is likely to feel the immediate heat of the recent hikes. Reason: Most of its customer base consists of workers in micro, small, and medium enterprises (MSMEs), and small and medium enterprises (SMEs), which have been the worst hit.
What Should Home Buyers Do?
Many experts feel that India will tide over the crisis without major impact, courtesy of a thriving domestic market and recent measures implemented by the government, among others. Having said that, some do feel that the trickle-down effect will be felt. They say that the atmosphere of economic uncertainty and potential rise in construction costs, caused by a weaker rupee and more expensive imported materials, could hike property prices.
Whether the tariff hike hits the Indian real estate sector or not, here are certain points every home buyer should remember.
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Think ahead
To begin with, check if the property you are keen to buy will appreciate in the long term. Also, make sure to choose a reputed developer who will complete the project on time, irrespective of the impact the tariff hike will have on the realty sector. -
Be aware
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Choose the right type
Study the market thoroughly. From the price of various construction materials and household items to how the current scenario is going to affect your budget, evaluate everything.
A project that is under construction may feel the impact of the tariff hike in the times to come. So, it’s a wiser idea to buy a ready-to-move-in home. This will allow you to buy a house before your local property market is affected by the tariff hike.
FAQs
- Which are some of the sectors that have been exempted from the US tariff hikes in India? The sectors that have been spared a hike in trade tax include pharma, electronics and semiconductors, critical minerals, and energy.
- Which are the Tier II cities that are witnessing rising popularity among home buyers in India, and why? According to recent reports, cities such as Nagpur, Jaipur, Lucknow, Chandigarh, and Ahmedabad are becoming top preferences among home buyers. The reasons for their popularity include lesser pollution and population, developing infrastructure, and economic growth.
- How much tariff has America imposed on construction materials like steel and aluminium? After the recent tariff hike, the trade tax on steel and aluminum has been increased to a whopping 50%.
Sources:
Times of India | Economic Times | Hindustan Times | Economic Times | Outlook Money | Magic Bricks | Times of India
