Rs 5000/sq ft: Mumbai, Delhi NCR, Bangalore most expensive for construction

Tariffs may delay projects relying on imports, especially luxury and commercial; further price hikes could worsen affordability in affordable and mid-segments

Construction costs in India’s top metros have surged to historic highs, with luxury housing costs now crossing ₹5,000 per sq. ft in Mumbai and other Tier-1 cities, according to the latest industry data by real estate consultancy firm Anarock. Affordable housing remains the most pressured segment, with costs averaging ₹1,500–2,000 per sq. ft, while mid-range projects typically fall between ₹2,000–2,800 per sq. ft.

 

Costs Up 40% in 5 Years

 

Between 2019 and 2024, the cost of constructing homes jumped by 40%, including a steep 27.3% rise in just three years. In October 2021, building Grade A homes in a Tier-1 city cost around ₹2,200 per sq. ft; by October 2024, it had climbed to ₹2,800 per sq. ft.

 

Key drivers include:

 

Material inflation: Cement (+30–57% in 5 years), steel (+30%), copper (+91%), aluminium (+80%).

 

Labour wages: Up 150% since 2019, rising 25% in the last year alone.

 

Fuel and logistics: Higher transportation and compliance costs add further strain.

 

City-Wise Construction Costs (2025, est.)

 

Mumbai: ₹2,500–4,500 (affordable), ₹3,500–5,000 (mid), ₹5,000+ (luxury)

 

Delhi NCR: ₹2,000–3,500 (affordable), ₹3,000–4,500 (mid), ₹4,500+ (luxury)

 

Bangalore: ₹1,800–3,200 (affordable), ₹2,800–4,000 (mid), ₹4,500+ (luxury)

 

Other metros like Chennai, Hyderabad, and Pune follow similar upward trends. 

Impact on Property Prices & Developer Strategies

 

On property buyers - Most developers tend to pass on increased input costs, either in part or completely, to their buyers. Recent data shows that at least 5–6% of the total input cost increases are directly reflected in housing prices. In affordable housing, even a hike of Rs 500–Rs 800/sq. ft can sharply impact buyer access, since an increase of  Rs 5 lakh is a massive additional burden for price-sensitive buyers when compared to those who buy premium or luxury housing.

 

On developers' profit margins - Smaller players who develop affordable housing already face thinner margins and are often unable to absorb even small cost increases. Many such developers have slowed down their launches or cut corners on amenities. In contrast, larger developers and luxury segment players can absorb cost increases because they enjoy higher margins and wield higher brand value

 

Homebuyer agreements: Most builder-buyer agreements include escalation charges, letting developers adjust sale prices upward along with cost increases, especially for under construction projects. This legal flexibility in the absence of regulatory constraints is behind much of the price transmission to buyers.

 

Housing prices: The combined effect has resulted in residential real estate prices rising by between 9-12% annually in recent years, with the increased construction costs a major driver along with rising land costs and reducing inventory. Pricing power remains strongest in metro cities, with less pronounced effects in smaller towns and cities where demand is lower. 

Segment-Specific Trends: Affordable vs. Mid-Range vs. Luxury

 

Affordable housing - Developers in this segment face the greatest construction cost-related constraints, as their target buyers are extremely price sensitive. Any increase in costs significantly impacts demand and can even result in stalled sales - as is seen in the massive decline in affordable launches share - 40% in 2019 to 12% in H1 2025, and sales share - 38% in 2019 to 18% in H1 2025 as per ANAROCK Research data.

 

Mid-range projects - These projects have some flexibility when it comes to transmitting higher costs to buyers; however, inflation and policy shocks can still edge out a big chunk of buyers in this segment.

 

Luxury projects - Cost hikes are more easily absorbed by this buyer group, which looks for premium features and tends to have bigger budgets. Price increases are also factored into brand perceptions and the desire for exclusivity. In short, this buyer segment is the least affected by higher input costs.

 

Tariffs May Push Prices Higher

 

Proposed 25–50% tariffs on imported steel, aluminium, and finishes could raise construction costs further:

 

25% tariff: Costs up by 1.5–2.5% for luxury/commercial projects.

 

50% tariff: Could add 5%+ to costs, delaying or derailing projects.

 

Developers may pivot towards local sourcing, but industry analysts warn this shift will take time.

 

GST Relief on the Horizon

 

A proposed cut in cement GST from 28% to 18% could reduce construction costs modestly:

 

Affordable housing: Prices may drop 2–4%.

 

Mid-segment: 2–3% reduction possible.

 

Luxury housing: Minimal impact, as premium imported finishes will still face the highest GST slab (40%).