Are land supply constraints, rather than developer profit margins, the primary driver behind housing unaffordability in major cities?
Between 2021 and 2025, residential housing prices across India’s top seven cities increased by 59 percent, significantly outstripping a 34 percent rise in construction costs during the same period. According to research from real estate firm Anarock, escalating land values served as the primary catalyst for the steep rise in property prices. During this timeframe, average construction costs increased from Rs 2,681 per square foot in 2021 to Rs 3,604 per square foot in 2025, reflecting a 6.9 percent compound annual growth rate. Additionally, geopolitical conflicts in West Asia have put further pressure on developers, adding an estimated 8 to 10 percent to construction costs due to rising steel prices and fuel-linked logistics expenses.
Home price growth significantly outpaced the increase in construction costs from 2021 to 2025.
Surging land prices were a main contributor to home price inflation.
Geopolitical conflicts in West Asia are placing extra cost pressure on residential projects.
The exact proportion of home price increases attributable to higher developer margins versus land acquisition costs.
How long West Asia logistics disruptions will continue to impact building material prices.
Whether residential housing demand will hold steady if developers pass additional construction cost increases onto buyers.