Surging Construction Costs Threaten to Push Up Home Prices as Developers Seek RERA Relief
New Delhi, May 30, 2026: A rapid surge in construction costs has emerged as a major challenge for the Indian real estate sector, threatening to drive up residential property prices in the near future. Continuous price hikes in essential materials like steel, cement, and aluminum, coupled with severe supply chain disruptions and acute labor shortages, are adversely impacting both the costs and timelines of ongoing projects across the country.
As budgets derail and construction activity slows down, industry associations have formally appealed to the Central Government to grant extensions on project deadlines under the Real Estate (Regulation and Development) Act (RERA) to mitigate the mounting financial pressure.
The crisis stems from a combination of global supply chain pressures and local logistical hurdles, including recent fuel price hikes that are expected to further escalate transportation costs. The rising prices of baseline materials like steel, cement, glass, bricks, and sand are being compounded by the soaring costs of specialized products such as construction chemicals, waterproofing materials, sealants, and admixtures. Beyond inflation, the industry is grappling with a severe scarcity of both skilled and unskilled workers, driving up wage rates and forcing developers to increasingly turn toward modern technologies and automation to keep operations moving.
Industry representatives emphasize that the problem is no longer just about the money, but also about the sheer availability of materials. Dinesh Gupta, President of CREDAI Western UP, stated that the continuous rise in the prices of construction materials and the limited availability of various products have exacerbated the challenges facing the sector. He noted that this has impacted both the costs and the timelines of projects. Under these circumstances—and keeping the interests of both developers and homebuyers in mind—there is a need to provide necessary relief regarding project timelines under RERA. Experts warn that if the situation persists, the fallout could negatively impact investments, employment, and allied industries, a worry reflected in the recently released Knight Frank-NAREDCO Sentiment Index, which indicates a distinct moderation in business sentiment within the sector.
Developers across the region echo these concerns, noting that the combination of delayed deliveries and rising expenses leaves them with very few options.
Dinesh Jain, MD, Exotica Housing, highlighted the operational friction by stating, “Rising costs are not the only cause for concern; the availability of essential materials has also emerged as a major challenge. When materials are not received on time, project timelines are disrupted, and the financial burden increases. Under such circumstances, it is only natural for pricing pressure on new projects to intensify.”
While many real estate firms have tried to protect consumers from these market shocks over the past several months, executives warn that this absorption strategy is reaching its absolute limit.
Himanshu Garg, Director, RG Group, explained the shifting dynamic, noting, “The continuous escalation in construction costs is becoming a significant challenge for developers. Until now, most companies have been absorbing a large portion of these additional costs themselves; however, if the rise in raw material and labor prices persists over the long term, the impact may eventually be reflected in the prices of flats and residential properties.”
To survive the crunch, the market is seeing a divide between well-capitalized, organized firms and smaller builders who lack the infrastructure to weather prolonged inflation.
Rakesh Singhal, Founder, Shree KB Group, observed that “The real estate sector is currently passing through a phase where developers are compelled to rely on technology, superior planning, and alternative resources. While organized firms are equipped to tackle this challenge, if the situation does not improve, homebuyers may have to face higher prices in the coming months.”
Despite the financial headwinds, consumer appetite for real estate remains strong, creating a frustrating bottleneck for builders who want to capitalize on market demand but cannot afford to build under current economic conditions.
Atul Vikram Singh, Founder, Vision Business Park, commented on this mismatch, stating, “Demand in the real estate market remains robust; however, the pressure stemming from rising costs and project delays is steadily mounting. If supply chain disruptions and labor shortages persist, it will become difficult for developers to complete projects at current price points, making it impossible to rule out the possibility of an increase in property prices.”
Ultimately, the compounding pressures of material scarcity and inflation are forcing the industry to reconsider the viability of affordable housing projects altogether without government intervention.
Summarizing the precarious position of the market, Shailendra Sharma, Chairman, Renox Group, concluded, “Shortages of various construction materials have led to a continuous rise in prices. We are committed to building budget-friendly homes for homebuyers; however, both factors will impact both the cost and timelines of our projects. Under these circumstances, it will no longer be feasible for builders to sustain such cost pressures over the long term.”
