GST reforms could offer relief, but affordability crisis deepens in housing market: ANAROCK
ADVERTISEMENT According to industry data, the cost of constructing residential projects has risen by 40% over the last five years, with a particularly sharp 27.3% increase between October 2021 and October 2024.
As a result, affordable housing's share of overall supply has dropped from 40% in 2019 to just 12% in H1 2025, while its sales share has shrunk from 38% to 18% over the same period (ANAROCK Research).
Rising input costs: Breaking down the pressure pointsThe biggest drivers of cost escalation are labour and raw materials. Labour wages alone have risen 150% since 2019, including a sharp 25% jump in just the past year.Meanwhile, prices of steel and cement have risen between 30–57% over five years, while copper and aluminium have seen even steeper increases — copper prices surged 91% between 2019 and 2024.
ADVERTISEMENT Other cost pressures stem from regulatory approvals, compliance, logistics, and higher fuel prices, further straining developer budgets. Unlock 500+ Stock Recos on App
ADVERTISEMENT The surge in input costs is reflected across cities, with construction expenses for affordable housing now ranging from Rs 1,500–2,500 per sq. ft in Kolkata to as high as Rs 2,500–4,500 per sq. ft in Mumbai.Luxury projects, by contrast, easily cross Rs 5,000 per sq. ft in metros, given higher finishes and premium materials.
ADVERTISEMENT Mumbai: Affordable – Rs 2,500–4,500 / Luxury – Rs 5,000+
Affordable – Rs 2,500–4,500 / Luxury – Rs 5,000+ Delhi NCR: Affordable – Rs 2,000–3,500 / Luxury – Rs 4,500+
Affordable – Rs 2,000–3,500 / Luxury – Rs 4,500+ Bengaluru: Affordable – Rs 1,800–3,200 / Luxury – Rs 4,500+
Affordable – Rs 1,800–3,200 / Luxury – Rs 4,500+ Chennai: Affordable – Rs 1,700–2,800 / Luxury – Rs 4,200+
Affordable – Rs 1,700–2,800 / Luxury – Rs 4,200+ Hyderabad: Affordable – Rs 1,600–2,700 / Luxury – Rs 4,000+
Affordable – Rs 1,600–2,700 / Luxury – Rs 4,000+ Pune: Affordable – Rs 1,800–3,000 / Luxury – Rs 4,500+
Affordable – Rs 1,800–3,000 / Luxury – Rs 4,500+ Kolkata: Affordable – Rs 1,500–2,500 / Luxury – Rs 4,000+
The cost hikes are squeezing affordable housing developers the hardest. Unlike luxury and mid-segment projects, where developers can pass on higher costs to buyers, affordable housing buyers are extremely price-sensitive.Even an increase of Rs 500–800 per sq. ft can raise unit prices by Rs 5–8 lakh, effectively pushing homes out of reach for large sections of the middle- and lower-income population.
ADVERTISEMENT Smaller developers, who primarily operate in the affordable segment, are increasingly delaying or cutting back launches. Larger and branded developers, with greater margins in mid- and luxury projects, are better positioned to absorb the shocks.The risk of tariff hikes on imported construction materials such as steel, aluminium, cement, and finishing equipment could push costs up further.A 25% tariff could increase project costs by 1.5–2.5%. A 50% tariff could escalate costs by 5% or more, with ripple effects across supply chains.Such hikes would disproportionately impact luxury and commercial projects that rely on imported materials, while further worsening affordability in lower segments.The government's proposed GST restructuring could partially offset cost pressures. Key changes include reducing GST on cement from 28% to 18% and rationalizing tax slabs to just 5% and 18%. This could lower input costs for developers and modestly ease housing prices:Affordable housing: Prices could fall by 2–4% if ITC (input tax credit) is reinstated.Mid-segment housing: Prices could drop 2–3% if GST is cut from 5% to 3%.Luxury housing: Minimal impact, as high-end items may still face steep taxation.Affordable housing, once the backbone of India's housing policy, is now at risk of slipping further behind. The twin pressures of rising construction costs and reduced affordability have led developers to focus more on mid-range and luxury projects.Unless policy interventions — including tariff moderation, GST reforms, and incentives for affordable housing — are implemented, the segment could face an extended slowdown, reducing homeownership accessibility for millions of Indians.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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