For India’s aspiring homeowners, the dream of owning an affordable flat is becoming harder than ever. A new ANAROCK Research report reveals that construction costs have shot up 40% in just five years (2019–2024), pushing affordable housing supply and sales to record lows.
Affordable housing, once a backbone of India’s housing market, has seen its launch share shrink from 40% in 2019 to just 12% in H1 2025, while its sales share dropped from 38% to 18%.
What’s Driving Up Construction Costs?
The cost of building homes has risen sharply across India’s top cities. Here’s why:
- Raw Materials: Cement (+30% in 5 years), Steel (+57%), Copper (+91%), Aluminium (+80%).
- Labour: Wages up 150% since 2019 and 25% in the last year alone.
- Other Costs: Higher fuel, compliance, and approval expenses.
City-Wise Construction Costs (2025 Estimates)
| City | Affordable Housing (₹/sq. ft) | Mid-Range (₹/sq. ft) | Luxury (₹/sq. ft) |
|---|---|---|---|
| Mumbai | 2,500–4,500 | 3,500–5,000 | 5,000+ |
| Delhi NCR | 2,000–3,500 | 3,000–4,500 | 4,500+ |
| Bangalore | 1,800–3,200 | 2,800–4,000 | 4,500+ |
| Chennai | 1,700–2,800 | 2,500–3,800 | 4,200+ |
| Hyderabad | 1,600–2,700 | 2,400–3,500 | 4,000+ |
| Pune | 1,800–3,000 | 2,400–4,000 | 4,500+ |
| Kolkata | 1,500–2,500 | 2,200–3,500 | 4,000+ |
Impact on Affordable Housing Buyers
For affordable homebuyers, even a ₹500–800/sq. ft increase means ₹5–8 lakh more on a 1,000 sq. ft flat — a deal-breaker for many families. Developers, facing thin margins, have slowed down launches, leading to an affordable housing crisis.
By contrast, mid-range and luxury projects can absorb cost hikes more easily. Luxury housing buyers are less price-sensitive, while affordable buyers often drop out entirely.
Tariffs & GST: Will They Help or Hurt?
- Tariffs: A proposed 25–50% tariff on steel, aluminium, and imported materials could push costs 2–5% higher, worsening affordability.
- GST Reforms: The government’s move to cut GST on cement from 28% to 18% could reduce home prices by 2–4% in affordable housing and 2–3% in mid-range housing — modest but meaningful relief.
Segment-Specific Trends
- Affordable Housing: From 40% share in 2019 to just 12% in H1 2025 (supply), sales also down to 18%.
- Mid-Range: Buyers stretched but still present; prices rising 9–12% annually.
- Luxury: Least affected — buyers accept higher costs for exclusivity.
What This Means for Homebuyers
For India’s middle- and lower-income households, the report signals a grim reality: affordable housing is fast disappearing. With costs rising and supply shrinking, buying early may be the only way to lock in a home before prices climb further.
