Residential Prices Surge 59% In Top Indian Cities Since 2021, Outpace Construction Cost Growth By Wide Margin

Mumbai: Residential prices across India’s top seven cities increased by 59% between 2021 and 2025, significantly outpacing the 34% rise in construction costs during the same period, according to latest data by Anarock Research.

The widening gap between construction expenses and residential capital values is being attributed to factors including rising land prices, developer margins and demand-supply dynamics. The trend has raised concerns over affordability for homebuyers while putting pressure on developers’ project margins.

Construction Costs Rise 34% In Four Years

Anarock data shows that the average cost of constructing a standard-plus residential project increased from Rs 2,681 per sq ft in 2021 to Rs 3,604 per sq ft in 2025, a rise of 34% or a compound annual growth rate (CAGR) of around 6.9%.

In comparison, average residential capital values rose from Rs 5,826 per sq ft to Rs 9,260 per sq ft, representing a 59% increase and a CAGR of nearly 12%.

Land Prices And Market Factors Drive Gap

According to the research, around 66% of the increase in residential prices is linked to construction expenses, while the remaining 34% is attributed to external factors, primarily higher land costs, developer margins and changing market dynamics.

“Land prices in the major cities have risen sharply in the last five years. Factors like infrastructure-led appreciation, demand-supply dynamics, location premiums and developer pricing have all contributed to the increase in residential capital values,” said Santhosh Kumar, Vice Chairman, Anarock Group.

Infrastructure Growth Pushes Land Values Higher

Land prices across the top seven cities increased by around 50% to 120% between 2021 and the first half of 2026. NCR recorded land value growth of around 70%-130%, while Bengaluru saw increases of 60%-120%.

“Higher land acquisition costs complicate both project feasibility and home pricing – especially in established corridors, where infrastructure improvements cause land values to rise steeply even before a project’s launch,” Kumar said.

Middle East Conflict Adds Cost Pressure

Construction costs have also come under fresh pressure from the Middle East conflict. Steel prices have risen around 20%, with TMT bars now costing approximately Rs 72,000 per tonne, while fuel and site logistics costs have increased 15%-20%.

Finishing materials such as tiles, glass and hardware have become 8%-12% costlier, while MEP costs have risen 9%-13% amid higher copper and aluminium prices. Labour remains the largest individual cost component, accounting for around 25%-30% of project costs, despite a more moderate 5%-6% increase.

“The Middle East tensions have caused steel, fuel-linked logistics, imported finishing materials and MEP costs to rise sharply, adding another estimated 8-10% to overall construction costs,” Kumar said.

The impact is expected to be sharper for projects already launched and sold, where developers have limited scope to pass on higher costs. New projects may have greater flexibility to reprice, while premium and luxury housing is expected to have relatively higher capacity to absorb increases.

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