Construction Costs in India Surge 40% in 5 Years, Fueling Real Estate Price Hike

The cost of constructing residential real estate in India has risen sharply over the past decade, with a 40% increase between 2019 and 2024. In just three years, construction costs jumped 27.3%, pushing average Grade A project costs in tier-1 cities from around ₹2,200 per sq. ft in 2021 to nearly ₹2,800 per sq. ft in 2024.

Key drivers include soaring raw material prices, higher labor costs, rising logistics and compliance expenses, and global supply chain disruptions. Cement and steel prices rose by 30–57% in five years, while copper surged 91%. Labor costs alone have climbed 150% since 2019.

Construction costs vary widely across cities. In 2025, Mumbai’s luxury housing projects exceed ₹5,000 per sq. ft, while affordable housing in Kolkata starts as low as ₹1,500 per sq. ft. Developers are passing higher input costs onto homebuyers, pushing housing prices up by 9–12% annually.

Affordable housing faces the sharpest impact, with its share in new launches plunging from 40% in 2019 to just 12% in 2025. Rising tariffs on imported materials could add another 2–5% to project costs, especially in luxury and commercial segments.

Proposed GST reforms, including reducing GST on cement from 28% to 18%, may provide some relief by lowering input costs and stabilizing property prices. However, until costs ease, affordability pressures will continue to reshape India’s real estate market.