In Kolkata we are seeing a trend of housing affordability which is coming under stress because of rising construction costs. As a large scale real estate company and one of the best real estate developers, Shriji Group Kolkata is very much aware of how these increasing costs are transforming the affordable housing market. In this blog we look at the elements which are causing the rise in construction costs, what that means for affordable housing projects and also what solutions developers are putting in place to deal with these issues.

Surge in Construction Costs: A Growing Concern

In a span of five years construction costs in Kolkata have seen a 40% increase which in turn has greatly affected the feasibility of affordable housing projects. What we see is that which factors are mainly responsible for this rise are:

• Labor Costs: A 150% growth since 2019.
• Raw Material Prices: Cement has seen a drop of 15% in prices which at the same time we saw an increase as high as 57% for steel and 91% for copper.
• Logistics and Compliance Costs: Growing costs of transport, approvals, and overheads.

As of now the average cost of construction for affordable housing is between the range of ₹1,500 to 2,500 per sq ft which is an increase from the 2019 range of between ₹1,000 to  1,800 per sq ft. Also as a result of this rise we have seen the proportion of affordable housing projects drop from 40% in 2019 to just 12% in the first half of 2025.

Implications for Affordable Housing Projects

Construction costs which are on the rise have:.

1. Increased Property Prices: Developers are passing the higher costs onto buyers which in turn is pushing up property prices. For example a 5% increase in construction costs we see that add to about Rs. 75,000 to the price of an 800 sq ft affordable flat
2. Reduced Profit Margins: Smaller developers see thinner margins which in turn delays launches or reduces amenities, while larger players and luxury developers are better able to absorb cost increases.
3. Shift in Market Focus: Many developers are moving into the luxury housing market which is more profitable and at the same time the affordable housing segment is becoming unprofitable.
4. Policy Challenges: The present price cap on affordable housing is at ₹45 lakh which is very hard to maintain with the rise in costs. Also report says that industry leaders are pushing for a change of this cap to between ₹60-65 lakh to make projects profitable.

Government Interventions and Policy Reforms

Recognizing that which the construction costs are on the rise the government has put forth a series of measures:

• GST Reduction on Cement: GST on cement which was at 28% is now at 18%, that is expected to reduce construction costs by about Rs 15 per sq ft. This reduction means a savings of around Rs 12,000 in an 800 sq ftaffordable flat.
• Increased Floor Area Ratio (FAR): Reform of which there is more flexibility in FAR which in turn allows developers to put forth their full vision for a site which may see a rise in the quantity of affordable housing options.
• Public Sector Land Utilization: Initiatives that go into developing affordable housing on public sector land may see that they also reduce what is for many as much as 40-50% of the construction cost outlay.

Strategic Responses by Developers

In terms of the issues presented by rising construction costs developers are seeing to it that they implement different solutions:.

• Focus on Efficient Design: Being the best luxury developers in Kolkata, in our design we put focus on space efficiency and cost effective materials which at the same time we do not sacrifice quality for.
• Leveraging Technology: Real estate builders & construction companies must introduce construction tech that reduces labour costs and improves efficiency.
• Exploring Alternative Materials: Using low cost and sustainable materials which in turn reduces total construction costs.
• Collaborations and Partnerships: For every real estate builders and developers partnership with government entities and other developers is significant in leveraging resources and reducing risk.

At Shriji Group Kolkata we focus on bringing to our projects high quality at affordable prices a commitment which is integrated into all we do and which also sees us respond to the ever changing market and the needs of our customers.

Conclusion

Rising construction costs in Kolkata present to the fact that many affordable housing projects are a challenge. But with smart planning, government support and innovation we see solutions to these issues. As a reliable real estate company and one of the best real estate developers, Shriji Group Kolkata is dedicated to bringing to our home buyers affordable housing options which also do not sacrifice quality.

If you are looking into affordable housing options or have questions related to the role of construction costs in property prices, the Shriji Group Kolkata is at your service. We would love to talk to you today about our projects also which we can present as a solution for your ideal home.