Average construction cost for housing projects up 39% in 4 years on rising rates of building materials and labor: Colliers
Nov 23, 2024, 14:52 IST
The average construction cost for housing projects in big cities has increased by 39% in the last four years to Rs 2,780 per sq ft, with building materials and labour becoming expensive, according to Colliers India. Real estate consultant Colliers India data shows that the average construction cost for premium housing projects stood at Rs 2,000 per square foot in October 2020.
The construction cost rose to Rs 2,200 per square foot in October 2021, Rs 2,300 per sq ft in October 2022, Rs 2,500 per sq ft in October 2023, and Rs 2,780 per square foot in October 2024.
Colliers India said these are average costs for a Grade A residential building of 15 floors. The data pertains to Tier-I cities. Over the last year, the consultant said the average cost of construction of housing projects rose 11% 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 a rise in the prices of four key construction materials, including cement, steel, copper, and aluminium, has been relatively low. 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.
However, the consultant pointed out that the labour cost rose 25% in the last year.
The average rate of copper and aluminium increased by 19% and 5%, respectively.
Badal Yagnik, Chief Executive Officer, Colliers India, said, "While the rise in prices of key construction materials was relatively modest over the last year, labour costs have been driving the overall cost of construction upward.".
"With labour accounting for more than one-fourth of overall construction cost, a 25% annual rise in labour costs has stretched construction budgets and impacted operational expenses."
Moreover, Yagnik said the need for skilled labour and the associated costs for training, safety, and regulatory compliance further add to spiralling labour costs. To navigate the steady rise in overall construction costs and associated challenges, Colliers India said that developers are optimising costs by reassessing budgets.
Real estate developers are also looking at improving supply chain management by diversifying suppliers and opting for localised sourcing of key construction materials, the consultant added.
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The construction cost rose to Rs 2,200 per square foot in October 2021, Rs 2,300 per sq ft in October 2022, Rs 2,500 per sq ft in October 2023, and Rs 2,780 per square foot in October 2024.
Colliers India said these are average costs for a Grade A residential building of 15 floors. The data pertains to Tier-I cities. Over the last year, the consultant said the average cost of construction of housing projects rose 11% 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 a rise in the prices of four key construction materials, including cement, steel, copper, and aluminium, has been relatively low. 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.
However, the consultant pointed out that the labour cost rose 25% in the last year.
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Badal Yagnik, Chief Executive Officer, Colliers India, said, "While the rise in prices of key construction materials was relatively modest over the last year, labour costs have been driving the overall cost of construction upward.".
"With labour accounting for more than one-fourth of overall construction cost, a 25% annual rise in labour costs has stretched construction budgets and impacted operational expenses."
Moreover, Yagnik said the need for skilled labour and the associated costs for training, safety, and regulatory compliance further add to spiralling labour costs. To navigate the steady rise in overall construction costs and associated challenges, Colliers India said that developers are optimising costs by reassessing budgets.
Real estate developers are also looking at improving supply chain management by diversifying suppliers and opting for localised sourcing of key construction materials, the consultant added.
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Additionally, real estate firms are increasingly making investments in training and automation to address challenges related to volatility in the availability of skilled manpower, which in turn can potentially facilitate better project scheduling.