Mumbai (Maharashtra) [India], November 14 : India's construction costs have risen by up to 11 per cent across residential, commercial, and industrial segments in 2024, says a report by Colliers.
While prices of some key materials like cement and steel have stabilized, high labour costs and fluctuating material prices have pushed overall expenses upward, especially in the residential segment.
"While 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," said Badal Yagnik, Chief Executive Officer, Colliers India.
For developers, this steady cost increase has prompted a re-evaluation of budgets and strategies. Many are optimizing expenses by improving supply chain management, diversifying suppliers, and opting for locally sourced materials.
Though recent years saw steep price hikes in key materials, 2024 showed relative stability. Average cement prices fell by 15 per cent over the year, while steel saw a slight decrease of about 1 per cent.
Nonetheless, construction costs rose due to significant increases in labour expenses and moderate increases in other materials, including aluminium, copper, and fuel.
Labour costs, driven by high demand in major cities, now account for around 28 per cent of total construction expenses, while materials make up about two-thirds of overall costs.
In the residential sector, construction costs surged by 11 per cent year-over-year. Higher costs are prompting developers to adopt cost-saving measures in procurement and design.
The cost hike, combined with rising borrowing expenses, has impacted profit margins, particularly in the affordable housing segment, which caters to price-sensitive buyers.
Commercial construction costs rose by 6 per cent, averaging Rs 2,850 per square foot as of October 2024. Demand for office space remains strong, with 37 million square feet of new office completions recorded in the first nine months of the year.
In the industrial sector, construction costs have remained stable in 2024 but have increased by 27 per cent since 2020.
"Despite rising construction cost across real estate segments, the commercial and industrial & warehousing segments have witnessed robust new supply during 2024" says Vimal Nadar, Senior Director and Head of Research, Colliers India.
With growing demand for warehousing and industrial space, construction projects in top cities are on track, with an estimated 25-30 million square feet of new supply expected this year.
Developers are incorporating automation and sustainable features to adapt to evolving market needs.