Mispricing of Climate Risk Drives Systemic Failure and Stranded Assets in India’s Urban Real Estate Market

This study investigates the perception, disclosure, and financing of climate risks within India's urban real estate sector, examining the systemic barriers to climate-resilient development and the growing threat of stranded assets.A qualitative, exploratory research design was employed, utilizing secondary data from academic literature, policy documents, regulatory reports, and case studies. Thematic and framework-based analysis were applied to assess investor behaviour, disclosure practices, and financial mechanisms.The analysis reveals a self-reinforcing vicious cycle of climate vulnerability, driven by a critical disconnect between physical risk and financial pricing. Key issues include low investor awareness, a retail demand-side vacuum, and lending models blind to location-specific vulnerabilities, leading to a systemic misallocation of capital. This failure is exacerbated by a significant governance deficit compared to global benchmarks and disproportionately impacts the vast informal housing sector. The result is a two-tiered market emerging, with stranded assets already materializing in climate-exposed zones.The study concludes that targeted interventions are urgently needed to break this cycle. Key recommendations include mandating climate risk disclosure, integrating climate vulnerability assessments into urban planning, and reforming the financial system through climate stress-testing and risk-based lending to align capital with resilience and promote equity.This research bridges a critical gap by linking climate risk perception, disclosure, and housing finance in the Indian context, offering a holistic framework for policymakers, developers, and financiers to foster a climate-resilient real estate sector.