Delhi's Air Quality Index, or AQI dropped to 303 on a scale of 500, down from 499 nearly a week ago, when a thick haze hung over the city of more than 200 million people. The current AQI levels still indicate "very poor" conditions, according to government monitoring agencies.
"Air quality is slowly improving," Gopal Rai, the capital's Minister for Environment, Forest and Wildlife Development, told a news conference. "Labourers were facing difficulties, and that is why we have decided to resume construction activities."
He said the authorities would monitor construction sites to ensure that builders follow dust-control measures set out by the government.
In an interview last week, Rai said the city would consider restricting private vehicles to driving on alternate days if severe air pollution continued to plague India's capital.
Apart from banning construction, the city government had also shut schools and offices, allowing people to work from home.
Rai told the news conference the authorities would review the city's air quality on Nov 24 and then decide whether to reopen schools and offices.
"We are closely monitoring," the minister said. He also urged residents to use public transport.
Vehicular emissions contributed to more than half of Delhi's air pollution between Oct 24-Nov 8, the Centre for Science and Environment think tank said earlier this month.
Delhi's choking air put more children in hospital with breathing problems, doctors said last week, and the government shut five power stations and extended school closures to contain the crisis.
Air quality deteriorates sharply in the winter months in Delhi, often ranked the world's most polluted capital. Pollutants emanating from crop residue burning, transport, industries and coal-fired plants outside the city tend to get trapped as temperatures fall during winter.