House Construction Costs Rose by 34%, While House Prices Soared by 59%; Here’s the ‘Secret’ Behind the Difference

An analysis of data from 2021 to 2025 shows that house prices in the city increased nearly twice as fast as the cost of constructing a house.

In the housing market, the main reason for the sharp increase in house prices is the rise in land values, according to experts. A comparison of data from 2021 to 2025 shows that house prices have increased nearly twice as much as the cost of constructing a house. This is based on a report published by Anarock Research, a leading real estate research firm. The report indicates that land prices in the top eight major cities across the country are largely responsible for this significant difference.

In Hyderabad, for example, the average construction cost of a house increased by 34%, from ₹2,681 per sq. ft. to ₹3,604 per sq. ft. during the period. However, during the same period, the capital value of residential properties increased by 59%, rising from ₹5,826 per sq. ft. to ₹9,260 per sq. ft.

Rising Land Prices Driving Up Property Costs

According to the figures, while construction costs increased by an average of 6.9%, house prices increased by around 12%. About 66% of this increase in house prices is associated with higher construction material and labour costs. However, the remaining 34% increase is due to factors beyond the building itself.

The main reasons behind this are the shortage of available land and the sharp increase in land prices. Between 2021 and the first half of 2026, land prices in urban areas increased by 50% to 120%. Land prices along highways increased by 60% to 120%, while prices in Delhi-NCR increased by 70% to 130%.

Development Projects and Location Premium

The development of basic infrastructure such as metro lines, expressways and new airports is rapidly increasing land prices in the surrounding areas. As developers are forced to purchase land at higher prices, this additional cost ultimately gets passed on to homebuyers through higher property prices.

In addition, the cost of MEP (Mechanical, Electrical and Plumbing) technical systems such as plumbing, electrical works, fire safety and air conditioning has also increased significantly in Kochi. During 2023–2025, MEP costs alone increased by more than 17%. Currently, these technical systems account for around 22% of the total construction cost.

Rising Construction Material Prices

Conflicts in West Asia and global crises have led to an 8–10% increase in construction costs in recent times. Steel prices have increased by around 20%, reaching ₹72,000 per tonne. The prices of tiles and glass have increased by 8–12%, while interior and glass-related costs have risen by 15–20%. Labour costs, which account for around 25–30% of the total project cost, have also recorded an increase of 5–6%.