03 - 09 - 2026

India’s housing prices soar twice as fast as construction costs: Anarock

Housing prices across India’s top seven cities have surged at twice the speed of construction costs over the past five years, triggering an affordability crisis for home buyers and posing long-term margin risks for developers.

There is a stark 25 per cent divergence between the physical cost of building residential properties and their eventual retail price tags between 2021 and 2025, according to a report by real estate consultancy Anarock Research.

Indian residential property values surged by 59 per cent between 2021 and 2025, climbing from 5,826 rupees to 9,260 rupees per square foot at a 12 per cent compound annual growth rate, far outpacing the rise in physical building expenses and highlighting a widening gap between development costs and final market prices.

During the same period, the average cost to construct a standard-plus residential project rose 34 per cent from 2,681 rupees to 3,604 rupees per square foot—a 6.9 per cent CAGR—with construction expenses accounting for 66 per cent of the overall price increase.

The remaining 34 per cent of the price hike was driven by external factors, primarily escalating land costs, expanding developer margins, and shifting market demand-supply dynamics.

“Land prices in the major cities have risen sharply in the last five years. Factors like infrastructure-led appreciation, demand-supply dynamics, location premiums and developer pricing have all contributed to the increase in residential capital values,” Santhosh Kumar, Vice Chairman at Anarock Group said.

“The Middle East tensions have caused steel, fuel-linked logistics, imported finishing materials and MEP costs to rise sharply, adding another estimated 8-10 per cent to overall construction costs. Developers are now challenged on passing this on to home buyers without affecting affordability and sales momentum,” he added.

According to data of top seven cities shows a clear divergence between the cost of building homes and the prices at which they are sold. Construction costs have risen by over 34 per cent between 2021 and 2025, equivalent to a CAGR of about 6.9 per cent, while average residential capital values increased 59 per cent, a CAGR of about 12 per cent, it said.

Unlike cement, steel and labour, land is not captured in the construction-cost numbers.

According to Anarock, barring some outliers, land values in the top seven cities rose between 50 per cent and 120 per cent between 2021 to first half of 2026. NCR and Bengaluru saw the highest land price hikes of 70-130 per cent and 60-120 per cent, respectively, in this period.

Steel, Logistics Lead Surge

Within the Middle Eastern war-induced 8-10 per cent construction costs hike, steel and fuel-linked logistics are the sharpest movers. MEP and finishing materials have also recorded significant increases.