India’s Housing Market Is Growing in Value, But Is the Average Homebuyer Being Left Behind?

Buying a home is becoming more expensive, and the latest numbers show why. Property prices across India's top seven cities have risen much faster than the cost of building homes. For existing homeowners, this may be good news. But for someone saving up to buy their first house, it is another hurdle.

According to ANAROCK Research, construction costs in India between 2021 and 2025 have increased by 34 per cent. During this period, the cost of building a standard-plus residential project went up from Rs 2,681 per sq ft to Rs 3,604 per sq ft. But buyers faced a much steeper increase. Property prices rose 59 per cent, from Rs 5,826 per sq ft to Rs 9,260 per sq ft.

Construction costs account for about two-thirds of the rise in property prices, according to the report. The remaining increase comes from more expensive land, developer margins and changes in market demand and supply. In short, the jump in home prices cannot be explained by higher building costs alone.

For buyers, the reasons behind the increase offer little comfort. They have to pay the asking price, arrange a bigger down payment and take on a higher home loan. For many salaried households, particularly first-time buyers, the calculations are getting harder.

Buyers Are Changing Their Expectations

The pressure is also changing where and what people are willing to buy. Some are looking at smaller homes, while others are moving further away from established city centres.

Sonali Rajput, Group CEO and Executive Director, Samira Habitats (India) Ltd, says homebuyers are not giving up on ownership but are looking at different ways to get there.

A young professional unable to afford a two-bedroom apartment in Mumbai, for instance, may consider buying land on the outskirts instead. The idea is to own an asset in a more affordable location while continuing to rent closer to work.

Rajput believes this shift presents an opportunity for developers. “Rather than concentrating only on established locations, they need to look at emerging areas that could become viable residential markets with better infrastructure and connectivity,” she says.

A Cheaper Home May Not Mean Lower Expenses

A cheaper house may not always work out to be the cheaper option. If it is far from the workplace, the money saved on buying the property could go towards daily travel. Buyers also need to think about how close the house is to schools, hospitals, public transport and other facilities they depend on.

N Venkate Gowda, Managing Director of NVG Groups, says buyers are becoming more careful about the financial commitment involved in purchasing a home.

Land, labour and construction costs, along with regulatory expenses, have pushed up the cost of developing residential projects. But household incomes have not necessarily risen at the same pace. As a result, buyers are weighing the EMI burden and other ownership expenses more closely before making a decision.

He believes developers need to pay greater attention to construction efficiency and pricing, and offer homes that match the budgets of different buyer groups. In employment-led locations such as Yelahanka in Bengaluru, proximity to workplaces and everyday convenience should also influence project planning.

The Importance Of Employment Hubs

Vinod Kumar Yadav, Managing Director of Habulus Group, says the real difficulty is that the home people want and the one they can comfortably afford are increasingly different.

For salaried buyers, a large home loan can mean cutting back on other expenses or putting off important financial goals. They also have to consider whether a cheaper property in a distant location will make daily life more expensive.

Yadav points to Electronic City in Bengaluru, where a strong base of working professionals makes proximity to employment centres an important consideration. “Buyers can assess properties not just on their price but also on the time and money they could save on commuting,” he says.

He believes developers should focus less on promising future price appreciation and more on whether a home offers reasonable value to the person buying it.

Can Affordability Return To The Housing Market?

Rising property prices may reflect strong demand and increasing development costs, but they also raise a question: how long can the market keep growing if a section of potential buyers can no longer afford to participate?

Developers may not be able to control land prices or all input costs. However, better project planning, cost management and greater transparency in pricing can help. More importantly, housing options need to reflect what buyers in different income groups can actually afford.

Infrastructure development will matter just as much. Improved connectivity can make locations beyond established city centres more attractive, giving buyers a wider choice without necessarily pushing them into longer commutes.

The real test of the housing market is not simply how much property prices appreciate. It is whether people who want to own a home can still afford to buy one.