Construction Costs Up 40% Since 2019, Developers Push for GST Relief

Since 2019, construction costs have skyrocketed by nearly 40%, forcing developers to demand GST relief, pushing affordable housing in India into an even greater limelight, says Anarock Research. Developers warn that rising input prices continually erode margins and price out buyers, and now all hopes lie on the proposed GST cuts to relieve some pain. Between 2019 and 2024, the average construction costs for Grade A projects in Tier I cities moved from approximately ₹2,200 per sq. ft. to almost ₹2,800 per sq. ft., according to Prashant Thakur, Executive Director & Head of Research at Anarock.

“Even with the recent slowing down in cement and steel prices, overall costs remain significantly heightened than five years back. Labour cost alone has gone up by 150% since 2019,” he added. The situation has worsened due to the rising pricing of raw materials, labour shortages, fuel price increases, compliance costs, and city-specific variations. For instance, copper prices have risen by 91% in five years, and aluminium prices have followed suit. Approvals and logistics continue to add to the project budget.

Among metro cities, Mumbai, Delhi, and Bengaluru are the most expensive in terms of construction costs due to higher land and labour costs. Tier II and III cities are, however, not under as much pressure. Still, developers say the brunt ultimately falls on homebuyers, as 5–6% of the cost increases get directly passed on in housing prices. In affordable housing, even a hike of ₹500–800 per sq. ft. can make homes unaffordable.

Import duties on steel, aluminium, cement, and equipment could raise construction expenses by another 1.5–5% if tariffs increase to 25–50%. By contrast, a proposed GST cut on cement from 28% to 18% could reduce construction costs by 2–4%, offering some relief. Industry leaders stress that tax reforms are critical.

“Even a marginal correction now will ease pressure on developers and eventually benefit buyers,” said Harvinder Singh Sikka, Chairman, Sikka Group. Echoing the concern, Yash Miglani, MD of Migsun Group, said spiralling costs have already delayed several project launches. “GST rationalisation would restore balance in the cost structure and safeguard affordability, ensuring sustained demand for budget housing,” he noted. With costs unlikely to ease on their own, developers say policy reforms may be the only way to keep affordable housing within reach.