India’s construction market, currently valued at $685 billion in 2025, is expected to grow to $1.2 trillion by 2034, with a compound annual growth rate of 6.9%. The rise is attributed to sustained infrastructure investments and urban development, as per a report by Savills India and Hotelivate. Demand for offices remains strong, fueled by GCC expansion and a preference for Grade-A sustainable workspaces. Construction costs have increased by 6.4%–7.6%, mainly due to a significant rise in mechanical, electrical, and plumbing costs.
“India’s real estate sector is showing resilience, driven by evolving investor expectations and continued demand for high-quality assets,” stated Arvind Nandan, Managing Director, Research & Consulting, Savills India. Developers are focusing on efficiency, sustainability, and robust planning to enhance long-term value amidst input volatility and execution challenges. Retail and residential segments have seen the most significant rise in construction costs, increasing between 3.8% and 13.9% across sectors from 2023–2025.
The report highlighted a surge in construction costs for malls, luxury residential, mid-segment, and affordable housing. Luxury residential construction costs rose by 12.8%, followed by the mid-segment at 11.9% and affordable housing at 11.1%. There is a notable shift towards premium, quality-focused developments in urban markets within the residential sector. Volatility and wage inflation are impacting project economics, with steel, cement, and crude oil prices being key cost drivers. Construction labor wages have increased by approximately 23% from 2020 to 2024, significantly raising overall costs.
The hospitality sector is witnessing improved performance, with occupancy stabilizing at 67–68% and average room rates surpassing Rs 9,000. Investor confidence remains high, with over 1.2 lakh keys in the pipeline and 50,000 keys signed in 2025. Developers are advised to balance cost efficiency with quality, sustainability, and early-stage planning, design optimization, and capital allocation.
