India Housing Prices Surge as RERA Faces Affordability Test

Homebuyers in India’s seven largest residential markets are facing a widening affordability gap as property values have risen much faster than the cost of construction. Between 2021 and 2025, average residential capital values increased 59%, while construction costs rose 34%, creating fresh pressure on household budgets and raising questions about how urban housing can remain accessible.

The data points to a structural change in the economics of city housing. Construction expenditure for a standard-plus residential project increased from about ₹2,681 per sq ft in 2021 to ₹3,604 per sq ft in 2025. Average residential capital values, meanwhile, moved from ₹5,826 to ₹9,260 per sq ft. The difference cannot be explained by building materials alone. Land is excluded from the construction-cost calculation, and its rapid appreciation has become a major factor behind final home prices. Across the leading markets, land values reportedly increased by roughly 50% to 120% between 2021 and the first half of 2026. NCR and Bengaluru recorded some of the sharpest increases. For buyers, the effect extends beyond the advertised price. Higher property values can push households towards larger loans, longer repayment periods and smaller homes.

The pressure is particularly significant in the affordable and mid-income segments, where even moderate price increases can remove potential buyers from the market. The cost structure is also becoming more exposed to external shocks. Steel, fuel-linked transport, imported finishing products and mechanical, electrical and plumbing systems have all become more expensive. Labour remains one of the largest project expenses, while cement prices have shown comparatively moderate movement. For developers, the impact differs by project stage. Costs cannot easily be passed on when homes have already been sold, potentially reducing project margins. New projects have greater pricing flexibility, but higher prices can weaken demand if they move beyond local purchasing power.

This is where RERA becomes relevant beyond its role in project registration and buyer protection. Regulatory transparency can improve consumer confidence, but it cannot by itself resolve the underlying land and affordability equation. ANAROCK’s research has noted a significant shift in housing demand towards higher-ticket properties, while the share of homes below ₹75 lakh has fallen sharply since 2021. The next phase of urban housing will therefore depend on whether cities can expand supply without allowing land, infrastructure and construction pressures to push ordinary households further away from ownership. For a sustainable housing market, better regulation must increasingly be matched by more efficient land use, transport-linked development and a stronger supply of genuinely affordable homes.

Also Read: India Property Expansion Brings RERA And Capital Challenges

India Housing Prices Surge as RERA Faces Affordability Test