Summary of this article
Land prices surged up to 120%.
Housing prices rose faster than construction costs.
Infrastructure is driving land appreciation.
Land prices across India’s biggest housing markets have surged as much as 120 per cent since 2021, which has added to the cost of residential projects owing to rise in construction costs. According to Anarock Research, housing affordability across India’s top cities is facing pressure from this combination of rising construction costs and higher land values. The latter is emerging as an increasingly important driver of residential prices in the seven major residential markets in India, namely, Delhi-National Capital Region (Delhi-NCR), Mumbai Metropolitan Region (MMR), Kolkata, Chennai, Bengaluru, Hyderabad, and Pune.
Anarock Research said that the average cost of constructing a standard plus residential project across these seven cities have grown by 34 per cent between 2021 and 2025, from Rs 2,681 per square foot to Rs 3,604 per square foot. However, average residential capital values across these seven markets have climbed much faster, rising 59 per cent from Rs 5,826 per square foot to Rs 9,260 per square foot. Anarock said that 66 per cent of the increase in residential prices is linked to construction expenses, while the remaining 34 per cent is attributed to factors including the growing land costs, developer margins, and changing demands in the market.
Land Dictates The Appreciation Equation
Land prices in the seven markets have emerged as one of the most significant contributors to the increasing gap between construction costs and residential selling prices. Land values have increased by 50 per cent to 120 per cent across these markets between 2021 and H1 2026.
Delhi-NCR and Bengaluru saw the sharpest increases in land prices. Here, the market grew by 70 per cent to 130 per cent in Delhi-NCR market, and 60 per cent to 120 per cent in Bengaluru. This increase has been particularly attributed to high-demand corridors, where improving infrastructure, connectivity and sustained residential demand have pushed land prices up, even as new housing projects are being launched.
“Rising land and construction costs are now playing a much bigger role in housing prices across the major markets. The fact that home prices have moved up faster than construction costs shows how much land values are contributing to the final price of a home. This is particularly evident in Gurugram, including New Gurugram, where strong demand and limited availability of good land parcels have pushed land values up," says Ashok Singh Jaunapuria, Managing Director and CEO, SS Group.
Higher land acquisition costs can directly alter the feasibility of a residential project. Developers have to account for the increased cost of acquiring land, while also factoring in construction expenses, financing costs, taxes, marketing, and other margins. This, in turn, adds to the amount homebuyers have to pay to buy a home.
Santhosh Kumar, vice chairman, Anarock Group said in a release: “Land prices in the major cities have risen sharply in the last five years. Factors like infrastructure-led appreciation, demand-supply dynamics, location premiums and developer pricing have all contributed to the increase in residential capital values. The Middle East tensions have caused steel, fuel-linked logistics, imported finishing materials, and mechanical, electrical and plumbing (MEP) costs to rise sharply, adding another estimated 8-10 per cent to overall construction costs. Developers are now challenged on passing this on to homebuyers without affecting affordability and sales momentum.”
Why Are Prices Rising?
One of the biggest catalysts for land appreciation has been the development in infrastructure, such as new expressways, metro connectivity, airports, and other large infrastructure projects.
As expectations of improved connectivity translate into stronger investor and developer interest, land values also see an upward movement in prices. For aspirational buyers, this means that the price of a new home increasingly reflects not only the cost of constructing the building, but also the value of the underlying land and the infrastructure around it.
