Higher diesel prices are one of the hidden costs most homebuyers rarely consider. But they can have a real impact on construction costs and, eventually, property prices.
The ongoing conflict in West Asia has been pushing up fuel expenses across Malaysia’s construction sector, adding billions of ringgit to the industry’s overall bill. While the additional cost per home may appear relatively small, the combined effect across thousands of projects matters, especially for buyers and investors watching where property prices are heading in 2026.
Here is what the numbers reveal, which government measures are already helping, and how several targeted policy adjustments could further reduce pressure on developers, contractors and future homebuyers.
How Much Is the West Asia Conflict Costing Malaysia’s Construction Sector?
Juwai IQI Co-Founder and Group CEO Kashif Ansari estimates that the West Asia conflict could add RM1.1 billion to Malaysia’s construction industry diesel bill in 2026, based on the sharp rise in average fuel prices since the turmoil began.
According to the Department of Statistics Malaysia (DOSM), diesel was priced at RM3.04 per litre in the week of 26 February 2026, before the conflict escalated. Over the following 20 weeks, the average price climbed to RM4.80 per litre, representing an increase of 57.7%.
Diesel prices peaked at RM6.72 per litre during the week of 9 April 2026, more than double the pre-conflict level.
The conflict had dragged on and occasionally flared up, with no permanent settlement yet reached. The higher diesel costs work out to an average of about RM2,000 per new home. That adds a cost the industry can manage, to a sector the country relies on for affordable housing.
Kashif Ansari, Co-Founder and Group CEO, Juwai IQI
Where Does All That Diesel Go?
Malaysia’s construction sector uses an estimated 1.4 billion litres of diesel each year. However, not all of it is purchased at market price.
Under the SKDS fleet-card system, eligible commercial vehicles such as lorries and trucks can still buy diesel at RM2.15 per litre. Off-road machinery, including excavators, cranes, piling rigs and generators, does not qualify and must pay the full market price.
Kashif estimates that around half of the sector’s diesel use, or about 740 million litres, falls into this unsubsidised category. Applying the 57.7% average price increase to this volume for the remainder of 2026 produces the RM1.1 billion estimate, equivalent to roughly RM25 million in additional costs each week.
Diesel Cost Breakdown at a Glance
| Metric | Figure |
|---|---|
| Pre-conflict diesel price (DOSM, 26 Feb 2026) | RM3.04/litre |
| Average diesel price since conflict began (20 weeks) | RM4.80/litre |
| Price increase | 57.7% |
| Peak diesel price (week of 9 April 2026) | RM6.72/litre |
| Annual construction diesel usage | ~1.4 billion litres |
| Estimated unsubsidised portion | ~740 million litres |
| Projected extra cost for 2026 | ~RM1.1 billion |
| Extra cost per week | ~RM25 million |
Source: Juwai IQI analysis based on DOSM weekly fuel price data.
What the Government Is Already Doing Right
Under the SKDS fleet-card system, eligible commercial vehicles still buy diesel at RM2.15 per litre. That is a meaningful buffer for the construction industry’s on-road fleet.
The gap is in what the system does not yet cover.
The government could build on that success by adding ready-mixed concrete trucks, concrete mixer trucks and cranes to the subsidised fleet-card scheme. These vehicles are all vital to construction and are big users of diesel.
Kashif Ansari, Co-Founder and Group CEO, Juwai IQI
3 Targeted Fixes That Could Help Keep Housing Affordable
Kashif proposed three practical measures to help the construction sector manage higher diesel costs without passing them on to homebuyers.
- Expand the SKDS fleet-card scheme
Include ready-mixed concrete trucks, mixer trucks and cranes in the subsidised diesel programme. These vehicles are essential to construction and consume significant amounts of fuel. - Increase diesel quotas for rural contractors
Projects in rural and interior areas require longer travel distances and higher fuel use. Larger quotas would help prevent these projects from facing disproportionate cost increases. - Improve subsidy registration
Ensure all eligible construction vehicles are properly registered under SKDS. Closing this administrative gap could reduce costs without requiring major policy changes.
These targeted adjustments would strengthen the current subsidy system, reduce short-term pressure on contractors and help limit additional costs for homebuyers.
Worried about how rising costs affect the true price of buying a home? See the full breakdown of what a house in Malaysia really costs.
What This Means for Homebuyers and Property Investors
Should buyers be worried? Not yet, but the trend is worth watching.
An estimated RM2,000 increase per new home is manageable compared with the wider costs of buying a property. However, the concern is not the current amount alone. If the conflict continues, higher diesel prices could increase transport, cement, steel and logistics costs across the construction supply chain.
For new-launch buyers, existing SPA prices are unlikely to change, but developers may adjust prices for future phases and upcoming projects. If you are planning to buy, the complete 2026 buying guide covers everything from financing to stamp duty.
For subsale buyers, the effect is more indirect. Resale prices depend mainly on location and demand. However, if new launches become more expensive, more buyers may turn to the subsale market, adding further pressure to prices. KL subsale prices have already crossed RM1 million on average.
For property investors, higher construction costs could slow new supply. Fewer project launches and completions may tighten inventory over time, supporting rental demand and capital appreciation. Juwai IQI’s 2026 market forecast already flagged declining construction starts and a tighter market ahead.
First-time buyers should also continue exploring Malaysia’s affordable housing programmes and government schemes for B40 and M40 households, which can help reduce the financial burden of entering the market.
The Bigger Picture: A Manageable Challenge
Malaysia’s economy grew by 5.8% in Q2 2026, while construction remains central to the country’s development and affordable housing goals. This gives the government a strong reason to keep projects moving and prevent costs from rising unnecessarily.
The positive takeaway is that the subsidy system already supports much of the construction fleet. Extending protection to off-road machinery and rural contractors could help close the remaining gaps and absorb more of the cost pressure.
For homebuyers, the market fundamentals remain stable. Malaysia is still relatively accessible, particularly below RM500,000, where seven in ten property transactions take place. Understanding key financial terms and checking your loan eligibility early can help you stay prepared despite rising construction costs.
Juwai IQI Co-Founder and Group CEO Kashif Ansari’s analysis of rising diesel costs and their impact on Malaysia’s construction sector was featured in The Star.
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