Housing Prices Rise 59% in Four Years, Far Outpacing Construction Costs

Housing prices across India’s top seven cities rose sharply between 2021 and 2025, increasing by 59% compared with a 34% rise in residential construction costs, according to property consultancy Anarock. The widening gap highlights how land prices, developer margins and changing market conditions are increasingly influencing the final cost of homes.

Anarock’s analysis shows that the average construction cost of a standard-plus residential project increased from ₹2,681 per sq ft in 2021 to ₹3,604 per sq ft in 2025. That represents a compound annual growth rate of 6.9%.

Residential capital values, however, moved much faster. Average values climbed from ₹5,826 per sq ft to ₹9,260 per sq ft over the same four-year period, translating into a 12% compound annual growth rate.

The consultancy estimates that about 66% of the increase in residential prices can be attributed to higher construction costs. The remaining 34% came from factors outside standard construction-cost calculations, particularly land values, developer margins and broader demand-supply dynamics.

Land has emerged as one of the biggest contributors to the price gap. Unlike cement, steel and labour, land costs are generally excluded from standard construction-cost calculations. Across India’s top seven cities, land values increased by around 50-120% between 2021 and the first half of 2026, with sharper increases recorded in some markets.

The National Capital Region saw land prices rise by around 70-130%, while Bengaluru recorded an estimated 60-120% increase during the same period.

Construction costs are also facing renewed pressure. Anarock estimates that overall project costs have risen by around 8-10%, with steel prices increasing by about 20%. Mechanical, electrical and plumbing works have become 9-13% more expensive, while finishing materials have risen by 8-12%. Cement prices increased by around 4-5%, while labour costs rose approximately 5-6%.

The impact is particularly significant for developers with projects already launched and largely sold, as their ability to raise prices is limited. New projects offer more flexibility to factor higher costs into launch prices, although affordability and local competition remain important constraints.

For homebuyers, the widening difference between construction costs and selling prices points to continuing affordability pressures, particularly in affordable and mid-income housing. Premium and luxury segments, meanwhile, retain greater pricing power and may be better positioned to absorb higher costs or pass them on to buyers.