Residential property prices rose from INR 5,826 to INR 9,260 per sq ft between 2021 and 2025, while average construction costs increased from INR 2,681 to INR 3,604 per sq ft
Average residential property prices across India’s top seven cities increased 59% between 2021 and 2025, significantly faster than the 34% rise in average construction costs, according to the latest data from Anarock Research & Advisory. The report attributes the gap to factors including rising land costs, developer margins and changes in demand-supply dynamics.
The average cost of constructing a standard-plus residential project increased from INR 2,681 per sq ft in 2021 to INR 3,604 per sq ft in 2025, representing a 34% increase and a compound annual growth rate (CAGR) of 6.9%.
During the same period, average residential capital values increased from INR 5,826 per sq ft to INR 9,260 per sq ft, a 59% increase and a CAGR of approximately 12%.
Premium-segment construction costs increased by 39%, from INR 3,861 per sq ft in 2021 to INR 5,370 per sq ft in 2025, with a CAGR of 7.8%.
According to the Anarock report, 66% of the increase in residential prices is linked to construction expenses, while the remaining 34% is attributed to external pressures, primarily escalating land costs, developer margins and changing 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, Anarock Group
Land prices rise 50-120% across top 7 cities
Land costs, which are not included in the construction-cost figures, have become a significant component of the housing price equation, according to the report.
Anarock data shows that land values across the top seven cities, barring some outliers, increased by 50-120% between 2021 and H1 2026, equivalent to an approximate CAGR of 8-15%.
The National Capital Region (NCR) recorded a land price increase of 70-130%, while Bengaluru saw land values rise by 60-120% during the same period.
“Higher land acquisition costs complicate both project feasibility and home pricing especially in established corridors, where infrastructure improvements cause land values to rise steeply even before a project’s launch,” says Kumar.
The report said the impact of rising land prices is highest in established and high-demand corridors, where infrastructure improvements can result in sharp increases in land values even before a residential project is launched.
Steel prices, logistics add to construction cost pressure
Construction costs have also increased due to higher prices for key inputs and logistics, according to Anarock.
The report estimates that Middle East tensions have added another 8-10% to overall construction costs, with steel and fuel-linked logistics recording the sharpest increases. Finishing materials and mechanical, electrical and plumbing (MEP) costs have also recorded increases.
Steel, which accounts for 15-20% of construction costs, has increased by approximately 20%, with TMT bar prices reaching around INR 72,000 per tonne.
Fuel and site logistics, despite accounting for only 4-5% of project costs, have increased by 15-20%.
Finishing materials, including tiles, glass and hardware, have become 8-12% costlier, while MEP costs have increased by 9-13%, amid higher copper and aluminium prices.
Labour remains the largest single cost component, accounting for approximately 25-30% of project costs, but has increased by a more moderate 5-6%. Cement costs have increased by approximately 4-5%.
“The Middle East tensions have caused steel, fuel-linked logistics, imported finishing materials and MEP costs to rise sharply, adding another estimated 8-10% to overall construction costs. Developers are now challenged on passing this on to homebuyers without affecting affordability and sales momentum,” he adds.
MEP costs increase 17% between 2023 and 2025
MEP costs have increased faster than core building costs across the top seven cities, the report said.
Between 2023 and 2025, average core building costs increased 13%, from INR 1,956 per sq ft to INR 2,212 per sq ft.
MEP costs increased by more than 17%, from INR 672 per sq ft to INR 788 per sq ft over the same period. MEP accounted for almost 22% of total construction costs in 2025.
Mumbai recorded the sharpest increase in MEP costs, at 19.6% between 2023 and 2025.
The report attributed the increase to the growing sophistication of residential projects, higher copper and aluminium prices, equipment costs and shortages of skilled contractors. MEP includes electrical infrastructure, plumbing, HVAC, elevators and fire-safety systems.
Higher construction costs put pressure on housing affordability
The impact of higher construction costs varies depending on the stage of a residential project, according to the report.
For projects that have already been launched and sold, developers have limited ability to pass higher costs on to homebuyers. The immediate impact is therefore on project margins.
For new projects, developers have greater flexibility to re-price based on prevailing construction and land costs, subject to the affordability of the target clientele and the competitive environment in the local market.
The report said premium and luxury housing can absorb higher costs due to less price-sensitive buyers. In affordable and mid-income housing, however, price increases can affect affordability and demand.
Developers may respond through calibrated price increases, optimising project specifications, changing the product mix, slowing launch timelines, or focusing on locations and segments with stronger pricing power.
Founded in 2017 by Anuj Puri and Rohin Shah, ANAROCK is headquartered in Mumbai, India, and has a presence across India and the Middle East. The company provides services across the real estate value chain, including residential, retail, commercial, hospitality, land, industrial and logistics, investment banking, investment management, research, strategic advisory and valuations, among other areas.
