News: Home Prices Up 59% in 5 Years vs 34% Cost Rise: ANAROCK-04-09-2026

Housing prices in India’s top seven cities have climbed about twice as fast as construction costs over the past five years, according to a report by real estate consultancy ANAROCK.

Between 2021 and 2025, the average cost of building a standard-plus residential project rose 34%, a CAGR of 6.9%, from Rs 2,681 per sq ft to Rs 3,604 per sq ft. Average residential capital values went up 59%, a CAGR of 12%, from Rs 5,826 per sq ft to Rs 9,260 per sq ft. The report said this 25% divergence signals an affordability crisis for buyers and a margin threat for developers.

It said 66% of the price hike is linked to construction expenses, while the remaining 34% comes from external pressures, mainly rising land costs, developer margins and demand-supply dynamics. Land is not captured in construction-cost numbers, it noted.

Barring some outliers, land values in the top seven cities rose between 50% and 120% between 2021 and H1 2026. NCR saw the steepest increase at 70-130%, followed by Bengaluru at 60-120%.

Santhosh Kumar, Vice Chairman, ANAROCK, said infrastructure-led appreciation, demand-supply dynamics, location premiums and developer pricing have all pushed up capital values. Higher land acquisition costs complicate project feasibility and pricing, he said, especially in established corridors where infrastructure upgrades lift land values even before launch.

Kumar said Middle East tensions have added an estimated 8-10% to overall construction costs, which developers now find hard to pass on without hurting affordability and sales momentum.

Within that increase, steel and fuel-linked logistics moved the most. Finishing materials such as tiles, glass and hardware are about 8-12% costlier, and MEP costs are up 9-13% on higher copper and aluminium prices. Labour, the largest single component at approximately 25-30% of project cost, rose a moderate 5-6%, and cement 4-5%.

For projects already launched and sold, the report said, the scope to pass on costs is limited and margins will be compressed. New projects can be re-priced if buyers’ affordability and local competition allow. Premium and luxury housing can absorb higher costs, but price hikes in affordable and mid-income housing can dent demand. Developers are expected to opt for calibrated price increases, optimised specifications, changes in product mix, slower launches and locations or segments with stronger pricing power.