Affordable Homes Slip Away: Construction Costs Up 40%, Affordable Housing Share Falls to 12%

SquareFeatIndia — Thu, 21 Aug 2025 07:48:15 +0000

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.

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