Bengaluru’s housing market is currently navigating a perfect storm of rising construction costs and high interest rates, creating significant challenges for both developers and homebuyers. The escalating costs of materials, labor, and transportation are pushing up prices, while higher home loan interest rates are further limiting affordability for prospective buyers.
According to the Confederation of Real Estate Developers Associations of India (Credai), construction costs have risen by 11% this year alone. Key factors driving this increase include a steep hike in labor wages, which have nearly doubled, and transportation fees for materials like cement, which have surged. In particular, the daily wage for masons has risen to Rs 1,200, up from Rs 650-700 a year ago, and other laborers now cost Rs 750-800 a day, compared to Rs 400-450 previously. Mandatory regulations such as rainwater harvesting and other environmental norms have also added to developers’ expenses. “These regulatory mandates, along with the high cost of materials, have further raised the cost of construction,” explained Monnanda Appaiah, COO at Wienerberger India, a provider of clay building materials. Though the cost of steel and cement has somewhat stabilized, transportation costs for these materials remain high.
At the same time, home loan interest rates, currently around 9%, are making it more difficult for middle-class buyers to afford homes. This increase in interest rates, from around 7% two years ago, is deterring many from purchasing in prime locations. As a result, homebuyers are either scaling back their expectations or opting for more affordable options in suburban areas like Sarjapur and off Mysuru Road. Leelavathi Yadav, co-founder of SVK Constructions in Thindlu, pointed out that while builders are offering tiered options—premium, mid-tier, and basic—based on material quality, these cost-saving strategies still mean that buyers are settling for semi-furnished homes to stay within budget. “Many buyers are now opting to purchase land in suburban areas and build homes at their own pace,” Yadav said.
Developers are also adopting more cost-efficient construction methods, such as the dry-fix system, which reduces labor dependency and shortens project timelines. However, the high cost of land and rising interest rates continue to present significant hurdles, especially in the affordable housing sector. Kishore Reddy, CMD of Mana Projects, noted that the rising costs of materials have also delayed project timelines, as developers are forced to renegotiate contracts or find new suppliers. Suresh VP, vice-president of Credai, emphasized the need for government support to keep housing affordable. “Without measures like tax breaks, reduced land prices, and infrastructure support, the dream of affordable housing remains far from realization,” he said. In sum, Bengaluru’s housing market faces a complex set of challenges that threaten the affordability and accessibility of homes, particularly for middle-class and low-income buyers. With rising construction costs, high interest rates, and limited government support, both developers and buyers are finding it increasingly difficult to navigate the market.
