Affordable Housing Hit Hard as Construction Costs Jump 40% in Five Years: Anarock Study

According to the new Anarock Research study, almost 40% of home construction costs have increased in India between 2019 and 2024, and this segment of affordable housing has been most severely hurt by the growth.

The share of affordable housing in new launches has fallen from 40% in 2019 to just 12% in the first half of 2025. It is similar in terms of sales; it has dropped from 38% to 18% during the same time span.

A change from about ₹2,200 per sq. ft for Grade A projects in tier-1 cities in October 2021 to nearly ₹2,800 per sq. ft by October 2024 is what has happened in between these years. This has been attributed to inflation, disruption of supply chains, global micro-macroeconomic phenomena, and regulatory changes.

Input costs drive escalation
The biggest ingredient now contributing would seem to be labour costs, with a year-on-year increase of 25% and 150% over five years. Input costs also showed hefty increases. For instance, copper increased from around 91% between 2019 and the year 2024. Aluminium became expensive, and, as reported by certain increases in cement and steel prices ranging from 30 to 57%, all these increases happened in five years, despite a few recent declines. The overheads, such as approvals, compliance, and logistics, fanned budgets.

Keep variations of the cities.
In affordable housing cost terms, by 2025, it can be anywhere from just about ₹1,500 per sq. ft in Kolkata to almost ₹4,500 per sq. ft in Mumbai. ₹2,000 to ₹2,800, or more, will qualify as mid-range housing; whereas luxury housing in metros will climb above ₹5,000 per sq. ft.

Higher property prices for buyers. A rise of ₹500–800 per sq. ft can result in the addition of ₹5 lakh to an affordable house. Developers pass on 5–6% of costs incurred to customers, so with housing prices already swelled at 9–12% every year, smaller developers, squeezed on thin margins, are holding back launches or downgrading amenities. At the same time, larger players and luxury projects will still be more likely to withstand this.

Tariffs and policy relief
Anarock will warn that tariffs on steel, aluminum, and cement could raise costs by over 5% for import-heavy projects. However, proposed reforms in the GST on cement may provide some relief-GST, which is proposed to be brought down from 28% to 18%, would bring a 2%-4% reduction in housing prices in the affordable segment.

With that emerging reality, the go-burdened affordable housing sector kept losing to better-positioned mid-and luxury housing that absorbed rising costs better.