Construction Costs Soar: Mumbai, Delhi NCR, Bangalore Among Most Expensive Cities
Construction costs in top Indian metros have reached historic highs, with luxury housing in Mumbai and other Tier-1 cities now costing over ₹5,000 per sq. ft. Affordable housing remains the most impacted segment.
Construction CostsReal EstateAffordable HousingLuxury HousingMidrange ProjectsReal Estate MumbaiAug 19, 2025
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 of this increase include material inflation, such as cement (+30–57% in 5 years), steel (+30%), copper (+91%), and aluminium (+80%). Labour wages have also risen by 150% since 2019, with a 25% increase in the last year alone. Higher transportation and compliance costs add further strain to the construction industry.
City-wise construction costs for 2025 (estimated) are as follows:
- 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.
The impact on property prices and developer strategies is significant. 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 ₹500–₹800 per sq. ft can sharply impact buyer access, as an increase of ₹5 lakh is a massive additional burden for price-sensitive buyers compared to those who buy premium or luxury housing.
Smaller developers, who focus on 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 due to higher margins and brand value.
Homebuyer agreements typically include escalation charges, allowing developers to adjust sale prices upward 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.
The combined effect has resulted in residential real estate prices rising by between 9-12% annually in recent years, with increased construction costs being 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 show that developers in the affordable housing segment face the greatest construction cost-related constraints. Any increase in costs significantly impacts demand and can even result in stalled sales. The share of affordable launches has declined from 40% in 2019 to 12% in H1 2025, and sales share has dropped from 38% in 2019 to 18% in H1 2025, according to ANAROCK Research data.
Mid-range 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, on the other hand, can more easily absorb cost hikes, as this buyer group looks for premium features and tends to have bigger budgets. Price increases are also factored into brand perceptions and the desire for exclusivity, making this segment the least affected by higher input costs.
Proposed tariffs on imported steel, aluminium, and finishes could further raise construction costs. A 25% tariff could increase costs by 1.5–2.5% for luxury/commercial projects, while a 50% tariff could add 5% or more to costs, potentially delaying or derailing projects. Developers may pivot towards local sourcing, but industry analysts warn that this shift will take time.
A proposed cut in cement GST from 28% to 18% could modestly reduce construction costs. Affordable housing prices may drop by 2–4%, and mid-segment projects could see a 2–3% reduction. However, luxury housing will see minimal impact, as premium imported finishes will still face the highest GST slab of 40%.
Frequently Asked Questions
What are the current construction costs in Mumbai?
In Mumbai, construction costs for affordable housing range from ₹2,500 to ₹4,500 per sq. ft, for mid-range projects from ₹3,500 to ₹5,000 per sq. ft, and for luxury projects over ₹5,000 per sq. ft.
How have construction costs changed over the past five years?
Construction costs have increased by 40% over the past five years, with 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, which increased to ₹2,800 per sq. ft by October 2024.
What are the key drivers of the increase in construction costs?
The key drivers include material inflation (cement, steel, copper, aluminium), a 150% increase in labour wages since 2019, and higher transportation and compliance costs.
How do construction cost increases affect property prices?
Most developers pass on increased input costs to buyers, directly reflecting at least 5–6% of the total input cost increases in housing prices. This is particularly impactful in the affordable housing segment.
What is the proposed impact of GST cuts on construction costs?
A proposed cut in cement GST from 28% to 18% could reduce construction costs modestly. Affordable housing prices may drop by 2–4%, and mid-segment projects could see a 2–3% reduction. However, luxury housing will see minimal impact.
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