India’s Real Estate Sector Faces Rising Construction Costs and Supply Chain Crisis

India’s real estate sector is entering a phase where rising construction costs are no longer a temporary concern but a structural challenge. Developers across the country are now openly acknowledging that global conflicts, supply-chain disruptions, labour shortages and raw material inflation have sharply altered project economics.

According to industry estimates, construction costs have increased by more than 25% since the onset of global hostilities, creating pressure on project viability, delivery schedules and procurement cycles.

What makes the present situation more critical is that the challenge is no longer restricted to pricing alone. Availability of key materials has emerged as an equally serious concern, forcing developers to rethink execution strategies and timelines.

“Energy costs, aluminium, glass have gone up, labour has become expensive, availability of materials has become a bit of a challenge,” Vikas Oberoi, chairman and managing director, Oberoi Realty, told investors during the FY26 earning call. “These are stressing us out. But it’s a problem for the entire industry…but now it’s slowly starting to hurt you in a way.”

Industry experts believe the ongoing disruption may create a divide between organised and unorganised developers. Larger players with stronger balance sheets, technology adoption and procurement capabilities are expected to navigate the crisis more effectively than smaller regional firms.

“This phase could become a turning point for the sector, prompting developers to strengthen operational resilience and adopt more future-ready development strategies,” said Parvinder Singh, CEO, Trident Realty.

Rising input costs are also putting pressure on commercial feasibility calculations, especially in projects operating on thinner margins. Delays in procurement are gradually translating into longer delivery timelines, increasing stress across the execution chain.

“Construction costs have risen by over 25% since the onset of hostilities – a pressure that is meaningful and warrants attention. However, the organised sector today is far better equipped to navigate such challenges than it has been in previous cycles,” said Shekhar Patel, President, CREDAI. “The more immediate concern is not just cost escalation but availability. Certain critical materials are not accessible in the market regardless of price- a situation the sector has rarely encountered.”

The industry is now increasingly concerned about procurement unpredictability. Developers say that even where budgets are manageable, delayed access to materials is slowing project momentum.

“When procurement becomes a constraint beyond pricing, project timelines naturally come under stress,” Patel said.

CREDAI has already approached the Union Housing Ministry seeking appropriate RERA timeline relief measures to safeguard both developers and homebuyers amid prolonged execution uncertainties.

Labour availability has emerged as another major concern, particularly after regulatory disruptions and election-related migration movement in several regions.

“The biggest challenge is to get labour. Because of the NGT ban and then elections, there has been a shortage and we are trying to mitigate it by using technology,” said Pradeep Kumar Aggarwal, Chairman and Whole-Time Director, Signature Global.

Developers are also warning that if geopolitical tensions continue over the next several months, the pressure may extend beyond the real estate sector and begin impacting broader economic activity.

Gaurav Pandey, managing director and CEO, Godrej Properties, told investors the cost impact would be between 5% and 6%. “I think more fundamental is the supply side shock…. If the (situation in the Gulf) continues for 6-12 months, then I think that’s something which has different economic risks than only sector specific,” Pandey said.

The present crisis may ultimately reshape the sector’s operational priorities. The focus is gradually shifting from aggressive expansion to execution efficiency, procurement security, technology-led construction and financial resilience. For many developers, the coming quarters may not just test profitability, but also long-term sustainability in an increasingly volatile global environment.

Closing Insight

The real estate sector has survived multiple economic cycles, but the current challenge is different because it combines inflation, supply disruption and labour uncertainty at the same time. While larger organised developers may still have the capacity to absorb rising costs and execution pressures, smaller players could face increasing stress in maintaining delivery commitments and financial stability.

What lies ahead may redefine how projects are planned, procured and executed in India. In the coming months, resilience, technology adoption and supply-chain preparedness may become as important as land acquisition and sales performance. The industry is no longer dealing with a temporary slowdown — it is adapting to a new construction reality shaped by global instability and operational uncertainty.

By Sana khan
Executive Editor, Realty Quarter
Mumbai