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Cost of construction rises up to 11% annually in 2024 across real estate segments
Cost of construction rises up to 11% annually in 2024 across real estate segments

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Rising construction cost has primarily been on account of labour cost surge, at about 25% YoY in the private sector.

 

Over the last one-year, average cost of construction is estimated to have risen up to 11%, mainly due to a significant surge in labour costs coupled with a moderate price increase in construction materials like sand, brick, glass, wood etc. Notably, the cumulative effect of rise in the prices of four key construction materials including cement, steel, copper and aluminum have been relatively low. In fact, average cement prices have seen a steep decline of 15%, while average steel prices have witnessed a marginal 1% decrease over the last 12 months.

Price/cost change of key construction cost components (Oct 24)

 Note: Prices for steel, cement, copper and aluminum is based on dealer-level cost as per Colliers’ internal costing framework; Overall values are exclusive of GST. Change in labour costs are as per market rates in private sector for Grade A developments in tier I cities.
Source: Colliers 

Construction cost increased by up to 11% YoY

 

Note: These are average costs in INR per sf for Grade A residential building of 15 floors, for Grade A commercial building of 10 floors and for Grade A industrial building with basement. Data pertains to tier I cities of the country

Source: Colliers

Cost of construction surges highest in the residential segment

As of October 2024, cost of construction in the residential segment saw an estimated 11% increase YoY. Amongst various real estate segments, construction cost escalation has been relatively sharper in the residential segment. Interestingly, increasing built quality consciousness and the growing demand for amenity rich gated communities have persuaded residential developers to upscale their real estate offerings in general and thus led to higher cost of construction cost in the residential segment.

To navigate the steady rise in overall construction cost and associated challenges, developers are optimizing cost by reassessing budgets. They are also looking at improving supply chain management by diversifying suppliers and opting for localized sourcing of key construction materials. Additionally, real estate developers are increasingly making investments in training and automation to address challenges related to volatilities in the availability of skilled manpower, which in turn can potentially facilitate better project scheduling. Going ahead, a greater adoption of circular economy will not only optimize construction cost but also improve efficiency and support sustainability.

Read the detailed report here


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Colliers India
Sukanya Dasgupta, Head Marketing and Communications - sukanya.dasgupta@colliers.com

Colliers (NASDAQ, TSX: CIGI) is a leading diversified professional services and investment management company. With operations in 66 countries, our 18,000 enterprising professionals work collaboratively to provide expert real estate and investment advice to clients. For more than 28 years, our experienced leadership with significant inside ownership has delivered compound annual investment returns of approximately 20% for shareholders. With annual revenues of $4.5 billion and $98 billion of assets under management, Colliers maximizes the potential of property and real assets to accelerate the success of our clients, our investors, and our people. Learn more at corporate.colliers.com, Twitter @Colliers or LinkedIn.

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