Why Under Construction Homes Are Now More Expensive Than Ready Ones

In a surprising turn of events, under-construction properties in Mumbai, India's most expensive real estate market, have become more costly than ready-to-move-in homes. Property prices for under-construction homes surged by 33.4% YoY in Q1 2025, leading many to question the reasons behind this trend.

Real EstateUnderconstruction HomesProperty PricesMumbaiReal Estate MarketReal Estate MumbaiApr 06, 2025

Why Under Construction Homes Are Now More Expensive Than Ready Ones

Real Estate Mumbai:In the ever-evolving real estate market, a notable shift has occurred that has left many homebuyers and investors scratching their heads. Under-construction homes in Mumbai, India, have become more expensive than ready-to-move-in properties. This trend, which has been observed in Q1 2025, marks a significant departure from the norm, where ready homes were typically more costly due to their immediate availability and the convenience they offer.

The price surge of under-construction properties has been dramatic, with a 33.4% increase year-over-year (YoY). This spike can be attributed to a combination of factors, including increased input costs, regulatory changes, and a growing demand for new properties. Let's delve into each of these factors to understand the full picture.

One of the primary reasons for the higher costs of under-construction homes is the steep rise in input costs. Building materials such as cement, steel, and labor have seen significant price hikes over the past few years. These increases are often passed on to the buyers, making new developments more expensive. For example, the cost of steel, a crucial component in construction, has risen by nearly 20% in the last year alone. This increase directly impacts the overall cost of construction, which is ultimately reflected in the prices of under-construction properties.

Regulatory changes have also played a role in driving up costs. The Real Estate (Regulation and Development) Act (RERA) and other government regulations have introduced stricter norms for property developers. These regulations aim to protect the interests of homebuyers by ensuring transparency, timely project completion, and adherence to building standards. While these measures are beneficial, they have added to the operational costs for developers, who, in turn, pass these costs on to the buyers.

Another factor contributing to the price increase is the growing demand for new properties. Despite the economic challenges, the demand for housing in Mumbai remains robust. Many buyers are willing to pay a premium for new, modern homes that offer better amenities and designs. This high demand has given developers the leverage to set higher prices for under-construction properties, knowing that there is a ready market for them.

The trend is not unique to Mumbai. Other major cities in India, such as Delhi, Bengaluru, and Hyderabad, have also witnessed similar increases in the prices of under-construction homes. However, the magnitude of the increase in Mumbai underscores the city's position as a top real estate market and the intense competition among developers to attract buyers.

For homebuyers, this trend presents a challenging scenario. Those who are in the market for a new home must weigh the costs and benefits of buying an under-construction property versus a ready-to-move-in home. While under-construction homes may offer more modern features and design options, the higher prices and the risk of delays in project completion are significant considerations.

Real estate experts recommend that buyers do thorough research and due diligence before making a decision. It is essential to understand the developer's track record, the project's progress, and the terms and conditions of the sale agreement. Buyers should also factor in the potential for additional costs, such as registration and stamp duty, which can add to the overall expense.

In conclusion, the rise in the prices of under-construction homes in Mumbai is a result of a complex interplay of factors, including increased input costs, regulatory changes, and high demand. While this trend may pose challenges for homebuyers, it also highlights the continued attractiveness of the real estate market in one of India's most vibrant cities.

Frequently Asked Questions

Why are under-construction homes more expensive than ready-to-move-in homes in Mumbai?

Under-construction homes in Mumbai have become more expensive due to increased input costs, stricter regulatory requirements, and high demand. These factors have combined to drive up the prices of new developments.

What are the main input costs that have increased for property developers?

The main input costs that have increased for property developers include the costs of building materials like cement and steel, as well as labor costs. These increases are often passed on to buyers, leading to higher property prices.

How do regulatory changes affect the cost of under-construction properties?

Regulatory changes, such as those introduced by the Real Estate (Regulation and Development) Act (RERA), have added operational costs for developers. These costs are often passed on to buyers, contributing to the higher prices of under-construction properties.

What should homebuyers consider before purchasing an under-construction property?

Homebuyers should consider the developer's track record, the project's progress, and the terms and conditions of the sale agreement. They should also factor in potential additional costs such as registration and stamp duty.

Is the trend of higher prices for under-construction homes unique to Mumbai?

While the trend is not unique to Mumbai, the city has seen one of the most significant increases in the prices of under-construction homes. Other major cities in India, such as Delhi, Bengaluru, and Hyderabad, have also experienced similar trends.