Affordable Housing Supply Shrinks to 12% in H1 2025

20 Aug 2025 CW Team

India’s affordable housing sector is under mounting pressure as construction costs have surged 40 per cent in the last five years (2019–2024), according to the latest ANAROCK Research data. The steep rise has slashed the share of new affordable housing launches to just 12 per cent in H1 2025, down from 40 per cent in 2019, while sales share has plunged from 38 per cent to 18 per cent over the same period.

Escalating Costs Driving the Crisis

Between October 2021 and October 2024, construction costs for Grade A residential projects in tier-1 cities rose from Rs 2,200/sq ft to Rs 2,800/sq ft – a 27 per cent spike in three years alone.

Raw materials: Cement prices fell 15 per cent in the last year but surged 30–57 per cent over five years. Steel dropped marginally (1 per cent) year-on-year but is up significantly since 2019. Copper costs rose 19 per cent in one year and a staggering 91 per cent over five years, with aluminium also showing sharp escalation.

Labour: The single biggest driver – costs rose 25 per cent in the last year and a massive 150 per cent since 2019.

Other costs: Approvals, compliance, logistics (fuelled by rising fuel prices), and overheads further pushed up budgets.

City-wise estimates for 2025 place construction costs for affordable housing between Rs 1,500–2,500/sq ft, while luxury projects exceed Rs 5,000/sq ft in metros like Mumbai and Delhi NCR.

Impact on Developers & Buyers

Property buyers: Even a hike of Rs 500–800/sq ft can raise unit costs by Rs 5–8 lakh, making affordable housing unattainable for price-sensitive households.
Developers: Smaller players in the affordable segment face thinner margins, forcing them to scale back launches or compromise on amenities. Larger and luxury developers remain relatively insulated due to stronger margins and brand-driven pricing power.
Home prices: Housing prices across categories are rising 9–12 per cent annually, with construction costs a key driver alongside land prices and low inventory.

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