Construction Costs Soar to Rs 5,000/sq ft in Mumbai, Delhi NCR, Bangalore

Real estate consultancy Anarock reports that construction costs in top Indian metros have hit record highs, with luxury housing in Mumbai, Delhi NCR, and Bangalore now costing over Rs 5,000 per sq. ft.

Construction CostsReal EstateLuxury HousingAffordable HousingMidrange ProjectsReal Estate NewsAug 19, 2025

Construction Costs Soar to Rs 5,000/sq ft in Mumbai, Delhi NCR, Bangalore

Real Estate News:Construction costs in India’s premier metros have surged to unprecedented levels, with luxury housing costs now exceeding ₹5,000 per sq. ft in cities like Mumbai, Delhi NCR, and Bangalore, according to the latest data from 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.

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.

The key drivers of this surge include material inflation, rising labour wages, and higher fuel and logistics costs. Material inflation has been particularly significant, with cement prices rising by 30% to 57% over five years, steel by 30%, copper by 91%, and aluminium by 80%. Labour wages have also increased by 150% since 2019, with a 25% rise in the last year alone. Higher transportation and compliance costs add further strain to the construction industry.

City-wise construction costs in 2025 are estimated 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 are also experiencing similar upward trends.

The impact of these rising costs is significant on both property prices and developer strategies. 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 the affordable housing segment, even a hike of ₹500–₹800 per sq. ft can sharply impact buyer access, as an increase of ₹5 lakh is a substantial 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 their higher margins and brand value.

Most builder-buyer agreements include escalation charges, allowing developers to 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. The combined effect has resulted in residential real estate prices rising by between 9-12% annually in recent years, with the 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, as their target buyers are extremely price sensitive. Any increase in costs significantly impacts demand and can even result in stalled sales. This is evident in the massive decline in affordable launches share, from 40% in 2019 to 12% in H1 2025, and sales share, from 38% in 2019 to 18% in H1 2025, as per 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 of 25–50% 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 prices could see a 2–3% reduction. However, luxury housing will see minimal impact, as premium imported finishes will still face the highest GST slab (40%).

Frequently Asked Questions

What are the current construction costs in Mumbai, Delhi NCR, and Bangalore?

In 2025, construction costs in these cities are estimated 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).

What are the main drivers of the increase in construction costs?

The main drivers include material inflation (cement, steel, copper, aluminium), rising labour wages, and higher fuel and logistics costs.

How do rising construction costs impact property buyers and developers?

Most developers pass on increased costs to buyers, leading to higher property prices. Smaller developers in the affordable housing segment face the most pressure, while larger developers and luxury segment players can absorb cost increases more easily.

What is the proposed cut in cement GST and its potential impact?

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 prices could see a 2–3% reduction.

What are the proposed tariffs on imported materials and their potential impact?

Proposed tariffs of 25–50% 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.